Jenn Uhen on The Motley Fool: High Limit Credit Cards
Leveraging debt has been a big part of my financial journey. So I was excited when The Ascent by The Motley Fool asked me to weigh in on High Limit Credit Cards.
Below is what I shared and you can see the full article and their reviews of High Limit Credit Cards here.
What is a high limit credit card?
Credit cards with a limit of $5,000 and above are considered high-limit credit cards. There are some to be reported to have limits over $100,000.
When should someone consider increasing their credit card limit?
Like with any money move, make it intentional. You may want to consider increasing your credit card limit to improve your credit score. An improved credit card score will help you if you plan to: apply for a loan (mortgage, car, or personal loan), need cash to intentional move to a new life chapter, and it may even affect your car insurance premiums. There may also be a reason for using a credit card with 0% interest for a high ticket item if paying in full can get you a discount. I have negotiated medical bills by paying in full early, putting the full amount on a 0% interest card, and paying them off over time but before the 0% interest period is over. Note that this strategy will ding your credit score but I was able to recover those lost point quickly after paying off the total balance and relying on other factors of my credit score.
If you tend to carry a large balance on your credit cards and don’t pay them off in full, having a larger credit limit may tempt you into making some choices that may increase your debt, getting you further away from your Big Financial Goals. You know you best, so set yourself up for success.
How do high limit credit cards affect your credit?
A high-limit credit card can improve your credit score when looking at the Amounts Owed number. Amounts owed looks at the amount you have borrowed (balance on your credit card) compared to your available credit.
Your length of credit history, credit mix, and new credit are also factors in your credit score. I recommend seeing if you can increase your credit limit on your current cards (if you’re happy with them) instead of applying for new cards. Because keeping your longest open credit card will improve your credit score as well as not opening too many new credit cards.
How does someone get a high limit credit card?
If you are looking for a high-limit credit card, I recommend you start where you are.
If you like the perks and fees of your current credit card, call your issuer and ask for an increased limit. They may ask questions or have you complete some paperwork since some things may have changed since your initial application (they certainly would be happy if your income has increased).
If you have a credit card through a bank, walk into your branch (or call) and share that you want to build a relationship with a banker. Share your Big Financial Goals and your financial state. In that conversations they may suggest different products to help you reach your goal, whether it’s a credit card, loan, or HELOC (for homeowners).
Having a conversation is a great opportunity to ask questions and share. You’re also encouraged to get multiple perspectives and ideas as there are seemingly limitless ways to build wealth and hit your Big Financial Goals. Remember your financial journey does not need to be a solo one, so ask questions and normalize money talks.
See the full article on High Limit Credit Cards here.
