4 benefits of a credit card limit increase
And 3 ways to make the most of your higher cap
If your credit card company has boosted your spending limit, pat yourself on the back. In many cases, an increased credit limit, or cap, is like a “raise” for high-quality performance.
In the first 10 months of 2023, the application rate for credit card limit increases rose to 14.4%, from 11.5% in the same period in 2022, the Federal Reserve Bank of New York reported. But you don’t necessarily have to ask for a raise. Credit card companies might automatically raise limits for responsible cardholders.
Earning extra credit: 4 positive points to a higher limit
Regardless of whether your credit card limit went up automatically or because you applied, the bump presents opportunities for a healthier financial future. Here are four automatic benefits of a higher credit limit.
The bank is betting on you. A higher borrowing amount means the credit card company is confident you will repay your debt responsibly. The factors behind this trust can include income, a proven credit history, total expenses, and the number of credit card applications you’ve recently submitted.1 Pro tip: These trust factors also improve your chances of approval for other borrowing opportunities, such as personal loans and lines of credit.
A higher limit can help you score. A higher card limit could increase your credit rating – the number that lenders use to determine your creditworthiness. This is because a higher cap (limit) reduces the amount of the total credit you are using, or your credit use ratio. Typically, lenders prefer a ratio of less than 30% (carrying less than $3,000 of a $10,000 cap, for example). This shows you use the card regularly, but manage the debt well.2 Pro tip: A higher credit score can improve the terms of a personal loan, such as lower interest rates.
It’s your “rainy day” solution. If it’s drizzling in your house due to a leaky roof, that raised credit card cap can cover you. An increased limit would be handy for a range of life’s unforeseen emergencies, from a broken furnace in January to a car repair so you can get to work. Pro tip: This remedy is immediate and seamless; you don’t have to fill out an application or wait for approval, which for a personal loan can take a few days.3
It can reduce the number of cards in your wallet. The average American holds nearly four credit cards, and the average household carries a credit card balance of $6,088.4 This suggests the debt is carried across several cards. If the limit on one of those cards is raised, having one or more of the others might be unnecessary. Pro tip: Fewer cards are easier to manage – you have fewer interest rates to mull over and fewer payments to make, so you are less likely to miss one.
3 steps to take advantage of that increase
If you use your higher credit limit wisely, you can multiply the benefits. Following are three smart-money tips for making the most of your higher-limit credit card.
1. Shift credit for better balance. This is a good option if you want to reduce the number of credit cards you carry, and it can save you money if you transfer sums from other cards that carry higher interest rates. But read the small type and be aware of potential fees in doing so. With a First Financial Visa®, you can transfer balances from other cards without a fee or service charge for the first year.
2. Secure the card in your smartphone. Add your high-cap credit card to your digital wallet and give it priority access. You will speed up your in-store transactions – just tap and pay – and you can make purchases at times when you don’t have your wallet on hand. And a digital card is secure because it encrypts your information, protecting it from potential hackers. Learn more about our mobile wallet here.
3. Get to the points. If your credit card issues reward points for the dollars you charge, the higher credit limit earns more points, which are as good as money. You can redeem the points you earn on First Financial’s Visa Platinum*, Visa Signature*, and FC Cincinnati rewards cards for travel, gift cards, or discounts on FC Cincinnati tickets. Our FC Cincinnati cards also issue 10,000 points (worth $100) to those who spend $1,000 in the first three months.*
When you’re financially savvy, the upside can be limitless
If your credit card limit is raised, you can decline it, but there’s little downside to keeping the higher limit. You don’t have to max out the card, after all, and it can rescue you in an emergency.
And it speaks highly of you. You’ve been great with your finances, so take the bonus.
Your responsible credit card use should be rewarded. If you’re looking for a credit card that delivers more, consider our rewards card options here. You can apply online easily and start earning points and perks soon.
