What Are The Pros And Cons Of High Credit Limits?
Pros and Cons of High Credit Limits
When using a credit card, a limit is set upon how much you can spend before you max it out. This limit varies for each person and each credit card. So how high can your limits be? Or, more appropriately, how high should they be? Many would agree that a high credit limit would allow you freedom to buy as much as you want of whatever you want. Oh sure, you can pay for it later, it’s no big deal. Others would say that in reality, high credit limits bind you with debt that you cannot pay back. So who’s right? Is it really that bad to have high credit card limits?
Advantages of High Credit Card Limits
• Using your credit card more, as long as you pay the bills on time, adds points to your credit score.
• Purchasing expensive items is less of a hassle.
• You have money on hand for emergencies should the need arise.
• You do not have to worry about maxing out your credit cards.
Disadvantages of High Credit Card Limits
• If you cannot pay your monthly bills, the interest rates increase more quickly with a high credit card limit than if you were to have a low limit.
• Someone may steal your credit card, and with so much space within your limit will allow them to spend more money that you would have to pay back.
• With a higher limit, it would be more tempting to buy things with money you don’t have, even if you know that you could not pay it back.
• There may be less of a risk using some other form of credit, like taking out a loan.
Do It the Smart Way, Or Don’t Do It At All
When you put a limit on your credit card, be sure that even if you got to the limit that you could pay the money back without strain. Anything that you want that is more expensive than the amount you have within your limit is probably more safely purchased with a loan. It may even be worth it to save up money to buy it. Otherwise, if you cannot afford to increase your credit limit, you probably cannot afford to buy something that expensive.
Make It Easy To Give Back What You Borrow
It is good to keep in mind that no matter what you buy on credit, whether it is expensive or not, it is not yours until you have paid back the money that you borrowed to get it. The pros and cons of high credit limits do not change the fact that credit is money that you do not have, and so the best type of credit is affordable credit. Keeping your limits low will allow you to more easily pay your monthly bills and pay off your credit cards more often, and overall, you will be less likely to get trapped in debt that you cannot get rid of.