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Don't Let Your Credit Card Limit Fool You

Money Tip: Don't Let Your Credit Card Limit Fool You


Credit card companies are sneaky, especially if you're someone who carries a balance month to month. You may notice that your credit card company raises your limit here and there even if your balance was no where near your previous limit. The company wants you to think your balance isn't as high as it actually is, because they assume you're looking at the number according to how much you have left to use on the card.

Instead of assuming that we're thinking about the $3,000 balance hanging over our heads regardless the limit, they assume that $3,000 looks like a smaller balance when the limit is $9,000 instead of $7,000. So, if they raise the limit, we'll focus less on paying off our balance because it's not as bad as we thought, and will then carry the balance over for a longer, interest-bearing period of time. Better yet, we'll spend more because the percentage of debt we have to credit available wouldn't suffer.

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