Credit card is a very handy tool for your purchases or immediate cash requirement. It can be wondrous for some and a nightmare for others. Everything depends on how one manages their credit card bills.
Let us look into the pros and cons of increasing the credit limit. Once you weigh the pros and cons, you can decide whether to increase the limit on your credit card.
Additional Reading: How To Increase Credit Card Limit
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Pros |
Cons |
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An increase in the credit limit lowers the credit utilization ratio, thus automatically improving one’s credit score. This is because the credit score varies inversely with the credit utilisation ratio. |
With a high credit card limit, there are more chances of spending recklessly. If you continue to increase your expenditures with the increase in credit limit, then the main purpose of a credit increase gets lost which is to reduce the credit utilization ratio. |
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At times of emergencies like hospitalisation, a credit card with a high credit limit can help you cover expensive medical bills. Not just medical emergencies, a high credit limit can come in handy during any financial crisis. |
A high credit limit could lead to higher credit card expenditure, followed by the inability to pay the entire amount on time. When you carry forward a balance to the next cycle, you are liable to pay high interest on it. |
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A higher credit limit allows you to purchase goods which you might not be able to otherwise pay off in one go. |
In case of credit card theft or fraud, the loss incurred will be obviously more if the credit limit is high. However, this is not a major con as most credit card issuers make it easy to report a card theft, by offering a 24 x 7 hotline. |
Additional Reading: Is there a downside to increasing the credit limit?
Let us look into the pros and cons of increasing the credit limit. Once you weigh the pros and cons, you can decide whether to increase the limit on your credit card.