Nevertheless, a higher credit line may encourage unnecessary spending, increasing the risk of bad debt.
Let's talk about how credit cardholders can manage their limit more effectively.
What Your Credit Line Says About You
If you plan to get a new credit card, you may find that the range of your credit line will depend upon your personal credit rating. Of course, you'll most likely enjoy a higher credit line if you have an excellent credit score. On the other hand, if your score is poor, then you may start out with a low limit until credit rating improves.
If you have an average credit rating, you may get a moderate credit line. As you use your card and consistently pay off your charges, your issuer may voluntarily raise your limit. The issuer can also decrease your present limit if your payment history shows that you do not pay your bills on time.
Effective Credit Limit Management – How?
What is the secret to effective credit limit management? First, it's important to understand your personal capability as a cardholder. You need to be realistic in determining whether or not you can afford a particular purchase.
Before charging anything to your credit card, always consider two things: "Do I really need to make this purchase now?"; "Will I be able to pay may credit card balance in full and on time?"
By paying off your monthly balance in full, you actually accomplish three things: first, you eliminate additional fees such as the interest rate, late fees, and over-the-limit charges. Second, you minimize the risk of debt build-up. And last but not least, by freeing up your credit line and protect your credit standing.
However, there is a possibility that as your credit line increase, your spending may increase as well. Always be cautious about how you use your credit limit. Regardless of how high or low your credit line is, you need to consider your duties as a borrower.