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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.


Join The Conversation
emalove emalove 9 years
snowbunny11 snowbunny11 9 years
I wish my company would raise my limit! On my one credit card I can never seem to get the balance down to a good ratio. This is def. my goal over the next few months, so we'll see, but if they raised my limit I would not worry about it so much!
Ella4 Ella4 9 years
That just seems strange but then I'm from Australia and over here they can't raise your credit card limit with out your approval. You agree on a limit when you get the credit card, which seems like commonsense to me because you're kind of setting your own debt limits.
Le-Luxe Le-Luxe 9 years
Very smart....they definitely fooled me!
JaimeLeah526 JaimeLeah526 9 years
I'm with lizs. If the credit limit raises than your credit to debt ratio goes down and makes your credit score better. I don't really pay attention to the limit and only use the credit card when I have to.
Smart-Living Smart-Living 9 years
shanimalcracker- If you carry a balance and they raise your limit, then your credit to debt ratio improves which has a positive affect on your credit score.
shanimalcracker shanimalcracker 9 years
Someone told me if you have a higher credit limit, your credit score also goes up. Is that true? I have never carried a balance, but will request a higher credit limit partially because of the concept that my score will go higher.
uptown_girl uptown_girl 9 years
I only have 1 credit card, and only charge as much as I know I can pay off when the bill comes. It's mainly used for airline ticket purchases, Netflix, or unexpected purchases I don't have the money for RIGHT THEN, but will when I get paid in a week or two. Even when I bought my new computer on it I paid it off without carrying a balance. I just got lucky though, I bought the computer the day before my bill came in the mail, so I knew I had the entire cycle, plus the time after I got the bill to pay it. It was hard, but I did it. Debt scares me, CREDIT CARD DEBT REALLY SCARES ME.
lizs lizs 9 years
I think it's actually a good thing that credit card companies raise your limit - the ratio of your existing revolving balances to your total available credit is one of the things that goes into your credit score. I'd rather that any balance I might ever carry be small in comparison to my limit so that my credit score isn't affected.
mlen mlen 9 years
tricky! except i nevr pay attention to my limits- i couldn't even tell you what they are- so that wouldn't work for me
MindayH MindayH 9 years
I am pretty sure I wouldn't notice if my credit limit went up, but definitely would notice if I was carrying an interest incurring balance!
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