Increase Credit Limit

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Pros and Cons of a High Credit Limit

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On this site, I talk about the benefits of increasing your credit limit. However, if you do have a high credit limit, it is worth looking at the pros and cons of that.

It can help your credit score – As we talk about regularly on this site, having a high credit limit should mean that you have a low credit utilization, which will be a benefit for your credit score. The lower your utilization (in other words: the lower your balance is in comparison to your limit), the better it will be.
You have more available in an emergency – If you have a card with a limit of $1,000, and you have a large emergency, you may not have enough of a limit to be prepared for an emergency (which, you should also have an emergency fund). With a higher limit, it can give you a little more peace of mind. In addition, it can be hard to get credit when you really need it, so this would take care of the need for more at any time.
You can get greater rewards – The more you spend, the more rewards you can get. If you are regularly coming close to your limit (even with paying off the balance each month), a higher limit might allow you to better maximize the rewards you can receive.
Less likely to go over the limit – If you have a higher limit, you are less likely to approach or go over it. This is self explanatory, as going over your credit limit is always a bad thing.

– It can be a temptation for you – For many people, a higher credit limit simply means that they have more money to spend! Obviously, this is a really bad idea. If you are not able to use the card responsibly (no matter your credit limit) by paying off the balance each month, a higher limit is probably the last thing you need.
Bad in case of theft – If your credit card gets stolen, the thief could (in theory) rack up a higher bill. That said, fear of theft usually isn’t a good reason alone to not increase your limit.

Anything else that you can think of?

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