Posted by: John S Kiernan

There are four ways to increase your credit limit on a credit card: 1) Request a higher limit from your credit card’s issuer; 2) Wait for your credit card company to automatically raise your credit limit; 3) Add to a secured credit card’s security deposit; and 4) Apply for a new credit card account. Which you choose depends on what type of credit card you have and whether you’re looking for more spending power or a higher limit for credit-improvement purposes.

Low credit card limits are more than just an inconvenience. They can also lead to credit score damage due to high credit utilization. So people have different reasons for wanting to increase credit limits. And it’s no surprise that getting a higher credit limit is a popular goal, considering that some credit cards have starting limits as low as $200. Even many credit cards for people with good credit scores have credit limits of just $500+.

In any case, the key to getting a higher credit limit is proving: A) that you can afford it and B) that you’ll use the extra spending power responsibly. The right way to go about getting a higher credit limit isn’t always obvious, though. If it really was as easy as asking, and there were no risks involved, everyone would do it all the time. But each credit-limit-increase request can cause a small, short-term drop in your credit score. So let’s explore your options in a bit more detail.

Here's How to Increase Your Credit Limit:

1. Request a Higher Credit Limit Online: Log in to your credit card company’s website, pull up your account’s main menu and look for the option to ask for a higher limit. Then, answer the questions about your income, expenses and desired credit limit, and submit the request.This option is best with unsecured credit cards that have been open for at least six months, with consistently on-time payments. There may be a hard inquiry into your credit history when the credit card company evaluates your request.
2. Wait for an Automatic Credit Limit Increase: Credit card companies evaluate existing accounts on a monthly basis, usually beginning once an account has been open for five or six months. If you pay your bill on time every month, you may automatically receive a higher limit.This option is more of a happy surprise than something you can count on.
3. Add to a Secured Credit Card’s Security Deposit: Secured cards require users to place a refundable security deposit. The amount of the deposit becomes a card’s credit limit. And you can increase your limit by simply adding to your deposit.This option doesn’t let you borrow more, but it may help your credit score improve faster.
4. Apply for a New Credit Card Account: Opening a new credit card account will likely increase your overall spending power more than requesting a higher credit limit on an existing card. You may even get some extra perks in the process, such as a rewards bonus or a 0% introductory APR.

This option is best for people whose credit scores have improved since the last time they applied for a credit card. You can check your latest credit score for free on WalletHub.

Compare High Limit Credit Cards

That, in a nutshell, is how to increase your credit limit. But there’s a lot more to learn about the process if you’re interested. You might also be interested to know that it’s possible to decrease your credit utilization and reduce your odds of hitting your limit without requesting an increase. They include paying down debt and paying your credit card bills multiple times per month.

You can learn more about those strategies from our guide on how to improve credit utilization. And you can find more information about increasing credit limits below.

Pros & Cons of a Higher Credit Limit

Pros

• More Available Credit & Lower Utilization: The more available credit you have, the better – considering that credit utilization is a major component of the Amounts Owed section of your credit score, which accounts for 30% of your total score. Credit utilization is calculated for each of your cards individually as well as for all of your cards in combination.  More available credit will decrease your overall utilization as well as the individual ratios of currently tapped out cards. It will also signal to lenders that you are a trustworthy (as well as perhaps stretched thin) customer.
• Added Spending Power: A higher credit limit obviously enables you to spend more money. This may be a blessing for some, who perhaps need to finance car repairs or pay medical bills.  However, it can also be a curse for those who use the added spending power to support unsustainable lifestyles and to dig deep holes for themselves.
• Minimal Credit Score Impact: Requesting and receiving a credit line increase is far less detrimental to your credit standing than applying for and opening a new credit card. Yes, a credit line increase will impact your credit – altering utilization ratios, potentially requiring a credit pull and reducing your disposable income – but the damage won’t be too severe.

Cons

• More Debt Potential: U.S. consumers owe more than $1 trillion in credit card debt. We obviously have an overspending issue, and that clearly illustrates the danger inherent with a credit limit increase. Used irresponsibly, the added spending power could wind up representing the rope needed to hang your finances.
• Inability to Get Other Loans & Lines: The more credit you already have at your disposal, the less likely another financial institution be to extend you additional credit in the future. Your income and assets only enable you to support so much debt, after all, which means that a higher credit limit could make you less lendable moving forward.

How Credit Limits are Set

Credit card companies all do things a bit differently, but most base their credit limits on the same overall factors.

• Credit History & Disposable Income: The more disposable income you have and the longer your track record of financial responsibility is, the higher your spending limit will likely be. This makes sense, after all. Credit card underwriting – the process of deciding what, if any, product terms should be offered to a particular consumer – is all about maximizing the chances of profitability.  And you can’t turn a profit if you don’t get paid back for what you lend customers.Credit card companies therefore aren’t going to give a college student thousands of dollars of spending power because the expectation of repayment is so low.  A college student, already a risky segment from a responsibility standpoint, is likely to have a very thin credit file and a very limited amount of money at hand.
• Economic Climate: If the economic outlook is gloomy, credit card companies are much more likely to be conservative in their credit offers to all of their customers.  In these cases, even if your credit score has risen, you might not be granted additional credit.
• Security Deposit: In most cases, you won’t know how high your credit limit is going to be until you get approved for an account. Most credit card offers do not include this information.  Secured cards are the obvious exception.  Such cards require the user to place a refundable security deposit that acts as their credit line, providing a safety net for the issuer in case the cardholder doesn’t pay and ensuring the cardholder doesn’t spend beyond his means.
• Latest Account & Market Data: Another segment of the credit card market never actually discloses its spending limits, even once your account is active. No Preset Spending Limit credit cards and charge cards – which some consumers mistake to be limitless – have dynamic spending limits that are established on a monthly basis according to the customer’s spending and payment habits as well as the general economic climate.Not only do NPSL cards make it impossible to recognize when you’re close to your spending limit, potentially putting you in a pretty precarious position one day, but the lack of a straightforward spending limit also obscures your credit utilization with the credit bureaus, potentially damaging your credit score.  Some of the most popular cards on the market – Visa Signature and World Mastercard credit cards and American Express charge cards – actually have NPSL features.

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