High Limit Credit Cards for Average Credit

Earlier, credit card companies used to compete with each other to increase the limit on your credit card. But the recent slump in the economy has completely changed the scenario in the credit card industry. Although, many companies advertise about high limit credit cards for people with average credit scores, they are reluctant when it actually comes to granting them. Most credit card companies choose to play safe and hence grant low to medium limits for people with moderate credit ratings. Nonetheless, you can certainly apply for higher credit limit upon your existing credit card or acquire a new one with higher limit. But before that, you must understand if applying for higher credit is indeed a good idea or not.

High Limit Credit Cards for Average Credit

There are two schools of thought when it comes to credit limit on the credit cards. One school of thought advocates responsible usage of credit card and says that you should apply for only as much credit limit as you need. While the other approach is a little rebellious and says that you should apply for as much credit limit as you can get, irrespective of your spending habits. Each approach has its own pros and cons. Low or medium credit limit may force you to keep your expenditure in check. However, it is only good as far as you are repaying your bills on time, have a stable income and a good credit score. In short, it is for people who are used to living on a strict budget. However, an unforeseen expenditure may cause your whole budget to go awry. In that case a higher credit limit can come to your rescue.

Besides, credit cards for bad credit with high credit limit are particularly useful in improving your credit score. How? To answer this question, we might have to understand a few basics about the credit card limits. Credit limit is the maximum amount you are allowed to spend on your credit card each month. This amount appears on your monthly credit card statement. Similarly, total credit limit is the summation of credit limits of all the credit cards that are in use. Another thing to understand is the utilization rate, which is nothing but the impending balance on a credit card expressed as a percentage of the credit limit. For instance, if you have a credit card with a credit limit of $10,000 and you generally spend about $2000 on credit, then your utilization rate comes to about 20%.

Utilization rate, credit limit and credit score are all interconnected. High utilization rate often reflects bad credit score. It is recommended that you should not exceed your utilization rate beyond 50% on a single credit card and beyond 35% on all the credit cards put together. If you have a low credit limit, then your utilization rate is bound to increase. In the above example we had assumed credit limit as $10,000. Now let us see what happens when your credit limit is $2000. With a monthly expenditure of $2000 on a $2000 credit limit, your utilization rate shoots to a whopping 100%. Needless to say, this will hamper your FICO score and tarnish your credit report.

On the other hand, when you apply for high credit limit, you can decrease your utilization rate without actual decrease in the debt. With a credit limit of $20,000 or more your utilization rate for $2000 expenditure plummets to a mere 10%, which reflects excellent spending habits. Thus, your average credit score may actually get a boost and even the banks will be forced to improve your credit report. Thus, credit cards for average credit with high credit limit are indeed a great option, provided you stick to your usual spending strategy.

How to Apply

Your credit score, credit history and relation with the credit card company are the factors that play an important role in determining your credit limit. Hence, always try to approach those companies with whom you have a good relation. Inquire if you can get a raise on your current credit limit, so that you don't need to apply for a new credit card. However, make sure you are not requesting too high a credit limit as it may lead to denial of your request. Get the quotes and compare the interest rates and credit limits of different companies and apply for the one which suits you the best.

High limit credit cards are desirable only if you promise to stick to your budget. Increasing unnecessary expenditure may defeat the purpose of getting a high limit credit card.