Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk
When ever we take out a credit card, we are always tempted to ask the card issuer for a high credit limit. The card issuer will determine what level of credit they will extend to you based on your credit history, your income as well as other factors.
When you first take out a credit card the issuer will generally set a fairly low limit. I took out a credit card with Amazon last year and they opened my account with a £3,000 credit limit.
Now that may sound like a lot but back then I was spending over £20k per month on Amazon because I was doing something called “drop-shipping” (A roller coaster of a ride that was I can tell you)
I hit my credit limit within a few days, I would pay it off, hit it again, pay it off, hit it again but this card only allowed me to pay off the balance 3 times per month.
The reason I used the credit card as opposed to my own savings were:
But alas nothing lasts forever, and I stopped the drop-shipping business after only 4 months as it got completely out of control, i.e. I was making money, but the administration overheads were too much for me to continue.
Once I had ended the business, I made sure to close the credit card account as I no longer needed it and did not want any surprise charges down the road.
Using a credit frequently is one sure fire way to improve your credit scores, but also you need to show the card issuers that you are responsible by settling your account when the balance is due. Not a day later. Over time your credit score will improve. So, don’t worry too much if the credit limit you have been set when you are first issued the card is not as high as you had hoped. They will increase it but be careful.
Remember that a credit card is still a loan, that is why is it called a “credit” card. You are being extended a line of credit just like you would be extended a loan if you were to take out a short-term loan.
We all want to get and maintain good credit and a good credit score, and while there are many ways to do this, the simplest way is to use credit responsibly and pay your accounts and bills when they are due.
Another consideration is the interest rates which the credit card provider will charge. If you have poor or bad credit, they may charge a higher rate than the advertised representative rate they have advertised on their marketing material as they view people with poor or bad credit a higher risk to lender money to.
How To Get An Increase Your Credit Limit?
Below I have listed a few ways to get an increase to your credit card limit, overdraft or other line of credit.
You Simply Just Ask: Does not hurt to just ask your bank or card provider to raise your credit limit. You will be surprised how many times this has worked. If you have a good track record with the card provider, they may say yes to your request.
They may not say yes straight away; they may have to perform a few credit checks etc but you have to ask.
Many years ago, I had a job which required me to drive all over the country. I took out a credit card to pay for fuel which I needed, but it was never enough and towards the end of the month I was having to pay out of my own pocket.
So, I explained to the credit card company the situation they were more than helpful. They could see that the card was being used for purchasing fuel (And the odd apple pie) so they doubled my credit limit. No more dipping into my own cash anymore.
Automatic Account Reviews: Every few months the credit card company will review your account and automatically increase your credit limit. They will of course inform you if you are happy with the increase. If you are not for whatever reason you can contact them, so they leave the limit as it is.
If you have a large credit limit and only using a small amount of the credit available to you reflects well on you and will increase your credit score. Hence why I wanted to increase my limit on my credit card when I was dropshipping. Hitting my credit limit so many times in one month was good from the perspective of the credit card company, but too great for my credit score at the time. But needs must and all that.
Use the Card Responsibly: Use the credit on the card in a responsible manner. Don’t do what I did and blow through the credit limit in the space of a few days 3 consecutive times. All on Amazon which I am sure looked crazy to the card provider. They did freak out twice and stopped my card from making any more purchases until I reassured them that is was me making the purchases (I was buying Amazon vouchers and paying for good using the vouchers rather than directly from the card)
If you can explain to the card issuer exactly what you are using to purchase with the card it will put their mind at ease. When I explained to the card issuer the whole concept of dropshipping they were happy to let me continue.
Two cards are better than one: It did cross my mind to apply for another credit card. By the time I get to this point I decided that dropshipping was not for me. Although taking out another card or two will of course increase your credit limit straight away. But again remember, this is a high interest loan and not free money.
Consider your options: Don’t just apply for any old card. Look at all the cards on offer. Get a spread sheet out and list all the pros and cons of each of the cards. Some cards have great introductory offers of a period of 0% interest for a few months, some even allow you to transfer balances from one card to another and take advantage of the 0% offers.
Some cards come with holiday insurance or free car breakdown cover. It always pays to do your research.
It’s all about the timing: If you have just gotten a new job or have just been given a pay increase it might be a good time to ask your credit card provider for an increase in your credit limit. If you have had the card for longer than a year and have always repaid the balance in full is also another good time to ask for a credit increase.
Don’t ask for an increase if you are late with any repayments or you are paying back the bare minimum on the balance, the likelihood of getting an increase is fairly slim.
Don’t ask for an increase if you have already asked for an increase on other cards you may hold. Only ask for one, if you get it then be happy with that for a few months then ask another card provider to increase on another card.
Don’t be greedy: Don’t ask for an increase of £10,000 if you credit limit is only £1,000. If you ask for a huge increase the credit card issuer may start to get really suspect as to why you need such a large increase. If you are doing dropshipping like I was then you can justify it like that, but you have to justify the huge increase. If you only need to increase by a few hundred then ask for an increase of £500 and be content with that.
Look after your credit score and it will look after you.
Credit card companies are also regulated by The Financial Conduct Authority
Many people in the U.K struggle with debts and many do not know how to start to repay them speaking to a debt advisor is one of the best things you will do along with taking action yourself by speaking directly with your creditors.
https://www.nationaldebtline.org/ and https://www.moneyadviceservice.org.uk
You should always seek professional advice when handling debt problems. Cashute are not licensed debt advisers and any information contained in this article should not be taken as legal advice. It is your Responsibility to seek out correct legal advice