Received notification that you’re getting a credit limit increase? As tempting as it might be, you may not want to utilize it right away.

There are pros and cons of credit limit increases. While initially it’s exciting to know that you have access to a larger sum of money, it can also be potentially disastrous if you use it incorrectly.

Below, we’ll look at the pros and cons of credit limit increases to help you decide whether or not to use them.

What Are the Advantages of a Credit Limit Increase?

As well as the obvious increased borrowing amount, there are some other great advantages of credit limit increases. These include:

  • Lower credit utilization
  • Additional money for emergencies
  • Improved credit score
  • Potentially higher reward points

When the credit increase first kicks in, you’ll have a lower credit utilization score. This is great news for your credit rating. The amount of credit you’re using compared to how much you have is one of the leading factors that contributes towards your credit score. So, if you aren’t using the additional limit amount, your credit rating is going to increase.

You’ll also have additional money for emergencies, which can give you great peace of mind. You can’t always know what’s going to crop up in life and if you don’t have the money to cover emergencies, it can be extremely worrying.

If you have a reward-based credit card, you can also start earning higher rewards. The more you spend on the card, the more rewards you’ll get. These can include air miles, as well as cashback on your purchases. So, it could save you money in the long term too.

What Are the Cons?

Now that we’ve looked at the pros of a credit limit increase, it’s time to review the potential cons. These include:

  • It can harm your credit rating
  • You’ll be in more debt
  • Additional cardholders can also use the increase

While when used correctly, a credit limit increase can improve your credit rating, it can potentially damage it too. If you spend the extra money you’ve been given, it will make your credit utilization score increase. This in turn has a negative impact on your credit score.

There’s also the fact that you’ll be in more debt. As you already know, the more debt you owe, the more stressful life becomes. It will be much harder to get out of debt if you continue to use the maximum amount of money you can borrow.

Finally, if there are additional cardholders, they too will be able to use the increase provided. So, if your teenagers use the same account, this could cause significant problems.

Keep in mind that although you’re offered a credit increase, you don’t have to accept it. Take into account the pros and cons before deciding whether or not it’s the right option for you. Provided you are going to use the increase sensibly, it can have a positive impact on your financials. However, you need to be disciplined enough to use it correctly.


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