Should You Apply for a Credit Limit Increase?

Should You Apply for a Credit Limit Increase?

There are many reasons why people want to increase their credit limit. Usually though, the reasons are not really that financially sound, and are borne from the desire to be able to buy more things immediately. This is a perfect recipe for financial disaster, and can lead to massive credit card debt.

There are, however, valid or financially sound reasons for getting a credit limit increase. These reasons are not only harmless, but can actually be financially advantageous for you.

The top valid reason for asking for a credit limit increase would be to consolidate your credit card debt via balance transfer. If you are in a position where the interest rates on one, or more, of your cards are higher than the interest rates offered by one card when a balance transfer if done, then consolidating all your credit card debt into that one card makes perfect sense. However, for this to happen, you need to have a large enough credit limit on that card to be able to accommodate all the balance transfers. Just make sure that you apply credit card rates of all your credit cards into the equation when doing a balance transfer, to ensure that you choose the best credit card to consolidate your debt. Note too that you also have an option of just applying for a new balance transfer card, instead of asking for a credit limit increase on an existing card, since the introductory rates of balance transfer cards are usually really great.

Another reason, though this is one that is not encouraged, is to ensure that you have sufficient funds for special events such as emergencies and trips. If you do not have sufficient credit left to buy medicine or pay for medical services in case of an emergency, and you do not have a sufficient emergency fund stored in your savings account either, it makes sense to apply for a credit limit increase. If you are also travelling to another country that you are not very familiar with, you might also want to have your credit limit increased in case you have an emergency and do not have time to have enough money changed to the local currency. However, you should do this only to have access to a larger emergency credit and not so that you will have more leeway for your shopping.

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