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A Higher Credit Limit? Yes, Please!

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Thinking of raising your credit limit? Sure, a higher credit limit means that you have the potential to put more purchases on your plastic. But upping it can also have its benefits and improve your credit score, too. Here’s why a bigger limit can be better.

Lower Credit Utilization

Say you have a $5,000 credit limit and you regularly have a monthly bill around $4,000. In this scenario, you’re using 80 percent of your total available credit. Financial institutions frown upon this behavior because it looks like you’re close to maxing out—making them assume that you could have problems paying your bill in the future. And this high credit utilization will cause the credit agencies to ding your credit score.

Room for Emergencies

Undoubtedly, you’ve heard the financial advice that you should have funds set aside in case the unexpected happens. But there are times that you won’t necessarily be able to get to your emergency account (like when you’re traveling). A credit card can provide you access to cash—whether through a cash advance or by using it to pay for something—but only if there’s enough cushion between your existing balance and your credit limit.

Ability to Earn More Rewards

The higher your credit limit, the more charges you can make with your card. And if you earn points with each purchase, this can drastically increase your ability to rack up the rewards. Just remember to pay off your bill in full each month. Otherwise the perks you’re earning are not worth the high interest payments you’re making in exchange.

Better Loan Terms

As pointed out above, a lower credit utilization can increase credit score. And the better your score, the more enticing your mortgage and loan options will be. You’ll land a cheaper interest rate and you’ll be more likely to be approved for credit cards, car loans, and personal loans, too.

More Protected Purchases

Many credit cards offer consumers protections when they charge something. Among the safeguards: extended warranties, return protection, and damage or theft protection. A higher limit enables you to buy more things that would have this coverage.

Less Need for Multiple Cards

Any time you apply for a new credit card, your credit score can go down. Raising your limit on your existing card is the easiest way to avoid needing multiple pieces of plastic in your wallet. Plus, if you just have one credit card, there’s only one due date to remember—drastically reducing your risk of getting hit with a late fee or a payment delinquency.

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