Many of us have credit cards and sometimes our lender will increase the credit limit and other times we might ask for it to be put up for us. It is something that we should be wary of though and think hard about for a variety of reasons.
– Gives us more money to spend. Obviously we want to borrow money so that we can have more money to spend. It will help us to buy things that we need, pay bills or whatever. Sometimes we find that we are not managing and therefore need that bit extra to help us out. This can be useful as it can mean that we can manage our spending better without having to worry. However, once we increase our credit limit, it stays at that limit unless we ask the lender to reduce it. This means that we will always have access to this extra money. Although this can sound like a good thing it may not be. We may end up borrowing lots of money all of the time and this can be expensive as we will have to pay interest on it.
– Can make debt build up. It can then be easy to let the debt build up as we have easy access to borrowing. It can be tempting to only pay off the minimum too and not worry about repaying the debt. Although this can feel good as you can have the money as long as you need it, it means that you will be paying interest out each month and this can be really expensive. It may not seem much but if you add up how much you are paying in a year, you will find that it is significant, especially if you imagine what you might be able to buy with that money.
– Can affect our credit record. If you build up the debt so that you owe right up to your credit limit or at least higher than you have now then you may find that it has a negative effect on your credit limit. As different people use the credit report score in different ways it is difficult to always know what to do for the best. However, if you can borrow the least amount possible then this should help you to improve your credit score. Credit score is important in many ways. It is not just lenders that look at it as if you want to rent a home, take out a mobile phone contract or things like this a credit check will be done and you could end up not being able to find somewhere to live or being very restricted if you have a poor credit record.
– Can make future borrowing difficult. If your credit rating is not good then this can have an impact of the chances of you being able to borrow in the future. Potential lenders will look at your credit record so you need to keep this looking as good as possible. However, it is not just this that impacts your borrowing. You need to be able to afford the repayments and so if you borrow too much on your credit card, your minimum payments will be higher and you could end up not managing to afford repayments on any other types of loan. You may also feel that you do not want more debt as what you have is enough but if you need to buy things and do not have the money you will not have an option if you have used up your credit limit. However, if you increase your credit limit but do not spend the money, then it could be a useful way to get money in the future if you need it, although it will be expensive.
– Can be stressful. For some people debt can be stressful. Others may not find it so stressful but perhaps once it builds up or becomes a problem for them, then it starts to cause stress. This is not good as stress has all sorts of side effects which can make you feel really bad but also have impacts on your physical and mental health. Therefore if you can avoid having stress in the first place then you will be much better off. Therefore keep a close watch on how much money you are spending and think about whether you should increase your credit record and risk having your spending go out of control. You will know whether this is likely to happen to you or not, depending on your personality. Some people will be able to spend more when they really need it and then cut down when they do not but others will see an increase in credit limit as an opportunity to treat themselves to some new things and that is when it becomes a problem.