What does it mean when you get a higher limit on your credit card?

Question

Does that mean that your credit score went up or you are just a good customer? Thanks

Answer 1

The credit limit on a credit card is the maximum amount of money that you are allowed to borrow. So if you have a $500 credit limit - it means that you can spend a maximum of $500 before they start charging you all sorts of over the limit fees... The fees are what kill you and your credit score.

To keep your credit in good standing you want to have at least 3 types of credit cards-

A bank card (usually visa and mastercard service labels issues by banks)- Bank of America, Chase, MBNA, etc.
A Store card - (structure, target, walmart, nordstroms, etc)
and an entertainment card - (american express, diners club, etc)

This shows a variety in your credit obligations and rounds off your credit worthiness.

NEVER SPEND MORE THAN 40% of your available credit... if you have $1,000 credit limt, dont spend more than $400... after 40% you start cutting into your available credit and will eventually owe more than you can borrow (which is bad news).

Hope that helps...

Answer 2

An increase in your credit limit is nothing more than a lovely invitation to get into more debt with your credit card company whose very existence hinges on earning interest income on your indebtedness.

Granted, credit card companies usually award credit line increases to consumers who exhibit a positive payment history.

However, credit cards should be utilized for emergency purposes and purchases that can be paid within the month. The debt trap is to use the credit card to finance a lifestyle that you could otherwise not afford. (e.g. the $2K television)

Answer 3

If you are paying on time every month but not paying the balance if full, then the credit card company is luring/enticing you to carry a bigger balance. In the last 10 years I have never carried a balance on a credit card but my credit limit on a particular card went to $27,000. I left it as it was and continued to pay it off every month in full if there happen to be a balance. I rarely used this card - only overseas where (then) it didn't charge a transaction (conversion) fee for foreign currency. They later implemented an annual fee so I called and canceled it. They never made a dime off of me. Remember, a balance or $10,000 can take up to 45 years to pay off just paying the minimum payment due each month. Also, when they reduce the minimum due or offer a "payment holiday" (don't take it - send in payment anyway, it's more time for interest charges to accrue), it's to entice you to spend more too. Now I use an airline card and, of course, pay it off every month. It has a $50/year fee but I've flown to south South America (Arg. & Chile) 3 times for free which makes it well worth it!

Answer 4

It means they are pulling you deeper into debt, they see the gravy train. I would get increases and then call them to reduce it back down. If you really need money for a purchase over $500 go to your credit union. In fact get rid of the credit card all together, I haven't used one for 2 years and I have more money.

Answer 5

You're a good customer and have an acceptable credit history, thus, they have raised the amount of credit they will give you.

Answer 6

The creditor believes you can soend more and pay it back. If you keep the same balances you have, it will improve your fico by having more available credit. Your available credit and current balances account for 30% of your fico score.

Answer 7

It means that particular bank is trusting you with a line of credit. When they raise your credit line, they know from credit reporting agencies that you apparently know how to spend and invest RESPONSIBILY.

Answer 8

It can raise your debt to income ratio but it also is a way to encourage you to spend more

Answer 9

more debt is what it means-- a good customer with good payments record

Answer 10

IT MEANS THAT YOU ARE IN GOOD STANDING WITH THAT COMPANY. YOU PAY THE BILL ON TIME, AND MAYBE IN FULL.