03 Sep 2018

Big Limits: Everyone Wants Them

So, you just got a new credit card with great terms for balance transfers and low interest for purchases, but, your credit limit is only $500. Some people like having low credit limits on their cards so they cannot run up large bills. But, having a high credit limit gives you several advantages so long as you use your credit wisely.

If the amount of credit you use approaches your credit card limits, you will be penalized on your credit report. But, having a high credit card limit that you use no more than 50% of help maintain a better credit score.

How to Get a High-Limit Credit Card

There are two ways to obtain a high-limit credit card. The first way is to have a high income and low debt. If this is your credit profile, congratulations! you will likely be granted a premium credit card.

The other way to get a high-limit premium credit card is to earn it. Earning a high-limit card requires patience and a plan.

The Plan to Increase Your Credit Card Limits

Before you ask a lender to increase your credit card limit, you must prove to the lender that you handle credit responsibly. The best way to do this is to make sure you pay your credit card bills on time and for more than the minimum payment. (Only paying the minimum amount is very costly in interest payments and will take years to pay off).

Another way to show your credit worthiness is by lowering the amount of your credit utilization. Imagine you have a credit card with a $5,000 limit. You owe $4,000 on the card, meaning you are using 80% of your available credit. Your utilization of available credit is very high. Lenders prefer to see only about 10% of available credit used on a credit card. Lenders place a great deal of reliance on credit utilization as it makes up about 30% of your credit score – this has great significance when seeking a higher credit limit. So, one thing to do is transfer debt from a lower limit card to a higher limit card so that you have a lower amount of credit used.

Applying for a High-Limit Credit Card

People with excellent scores and high incomes may decide to apply for a high-limit credit card directly. These cards include:

  • Capital One Venture
  • Discover it
  • Chase Sapphire Preferred/Reserve
  • Gold Delta SkyMilescard

American Express has a card known as the Centurion Card. It has an annual fee of $2,500. AMEX is quite discrete about the benefits of this card but users have spilled some secrets.

Reports are that there is no official requirements for obtaining the Centurion Card, also known as the AMEX Black Card. Like other AMEX cards, there are two versions of the Centurion Card, one is for business and the other is for personal use. Rumors are that to be considered for this card, a business or an individual has to charge and pay off $450 thousand per year.

What Benefits Do I Get from a Higher Credit Card Limit?

If you have been careful in how you use credit and have used your existing credit properly you should ask for an increase in your credit card limit. One huge benefit is that your credit score will rise so long as you keep your credit use in line with responsible use. This will save you money from other lenders, help you get credit for an auto loan or a mortgage to buy a home.

Often, financial institutions offering high-limit credit cards have “rewards” attached to their use. Typically, these types of cards reward users with cash back. Other reward cards offer mileage points or reward points that are redeemable for travel and merchandise.

Make sure you check your credit score before applying for a card or an increased limit on a card you have. When you request a new card or a credit line increase, the financial institution immediately checks your credit score and credit report. This results in a short-term ding to your credit that disappears after a few months.