4 Benefits of Increasing Your Credit Limit

If you are a responsible credit card user, increasing your credit limit can have tons of advantages. From improving your credit score to helping you earn more rewards, check out these top four benefits of requesting a credit limit increase. 

Increasing your credit limit reduces your credit utilization ratio

By raising your credit limit, you increase your overall available credit. Doing so can help reduce your credit utilization ratio and consequently boost your credit score. For those that don’t know, credit utilization ratio is calculated by dividing your total credit limit (across all credit cards you own) by your existing credit card balances. Credit utilization ratio is one of the most significant factors used to calculate credit scores. If you can keep yours low (under 30%), you can improve your credit score. The higher your credit score, the more likely you are to be approved for a loan, making it easier to do things like open a business or buy a home.

Increasing your credit limit provides peace of mind in case of emergencies

Accidents happen. Whether you got into a car crash and now have an expensive car repair bill to pay or a pipe bursts in your home, emergencies can cause a great deal of financial stress. But if you have a higher credit limit, you can rest easy knowing that if an emergency occurs and you don’t have the cash on hand to pay for it, you can charge it to your credit card. Therefore, depending on your financial situation, increasing your credit limit can provide peace of mind that, should something go wrong, you have a means of paying for it in the short term.

Increasing your credit limit can help you earn more rewards

If you make a habit of paying your credit card on time and in full, you’re likely earning some great rewards points. But you might be able to earn even more rewards points with a higher credit limit. After all, most rewards cards give you points for every purchase. So if you were able to charge more to your card, you would benefit from more points. While most experts warn against charging everyday expenses, like groceries or gas, to your credit card, this advice only applies to people who might have trouble paying their bills at the end of the month. For people who can handle the financial responsibility, raising your credit limit will allow you to charge more purchases to your card, increasing your rewards earnings. 

Increasing your credit limit gives you better odds of being approved for a loan or another credit card

As mentioned above, a higher credit limit might lead to a higher credit score. And with a higher credit score comes perks like better odds of being approved for a loan (such as a mortgage or car loan) or another credit card in the future. Your higher credit limit might even make you eligible for a lower interest rate since it’s your credit score that determines whether a lender will offer you a low rate or a high rate.