Are you debating your next financial move? Perhaps you’re wondering whether it’s worth opening up a brand new credit card or simply requesting a credit card increase. Whether your goal is to improve your credit history or boost your credit score, the decisions you make about your credit card will impact them. While both options (opening a new card and requesting a limit increase) can be beneficial, there are a few considerations for each, which we’ve outlined below.
When To Consider A Credit Limit Increase
Increasing the limit on an existing credit card can be a wise decision for many reasons. First, while lenders like to see a diverse credit portfolio, having more than two or three major credit card accounts can be a red flag (especially if you just recently applied for a new one elsewhere). Plus, managing the balances, due dates, and fees for multiple cards can be overwhelming, possibly leading to costly errors. So if you already have two or more credit cards, we recommend requesting a credit limit increase rather than applying for yet another card. This way, there will be no changes to your monthly payment due dates, making the whole thing less risky.
While increasing your credit limit can slightly lower your credit score in the short term, it can also increase your credit utilization ratio and thereby raise your credit score in the long term. Card holders should be prepared for an initial dip in their credit score after applying for a credit limit increase. But so long as you continue to use your credit card responsibly and keep your credit utilization below 30% (which should hopefully be even easier now that your limit is higher), you will likely see your credit score increase soon.
One final note on credit card limit increase requests – credit card issuers do not have to approve your request. In fact, they will only do so if you have a strong credit score and are in good standing with the bank. If you frequently make late payments or have racked up a mountain of debt, your request could be denied. If you need the extra credit, your only option may be to apply for a new credit card altogether.
When To Consider A New Credit Card
Now that you know a little more about when a credit card limit increase makes sense, let’s dive into the alternative: a new credit card. While a limit increase is preferable for people who already have multiple cards and do not want to deal with the hassle of applying for a new card, a new account can be a good idea for some people. For example, if you currently only have one credit card, a second might be worthwhile. In fact, applying for a second credit card could actually boost your credit scores, as it will increase your credit utilization ratio and show diversity in your credit products.
In order to reap the benefits of opening up a new credit card, be sure to pay off your balance every month and take advantage of card perks. For example, some rewards credit cards will give you extra points if you purchase gas or groceries using your credit card. Before applying for a credit card, make sure to carefully read the qualifications and terms. Every card has unique qualifications and terms. For example, some credit card issuers require holders to have a certain income to apply, while others have expensive annual fees.
Aisha Noreen is an owner of a small business with more than 9 years of experience in the marketing industry. With the wisdom of an old soul, she always seeks innovation and mind-blowing ROI techniques. Her unique approach helped many small businesses thrive and she can surprise you in many ways as well. Believe it or not, her energy, passion, and creativity are contagious enough to transform your business and take it to another level.
