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January 19, 2022, 08:07:25 PM
Funfani.com - Spreading Fun All Over!INFORMATION CLUBInformative ZoneFinancial LiteracyHow a High Credit Limit on Your Credit Card Can Impact You
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Ryan Martis
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« on: July 11, 2009, 06:29:55 AM »

How a High Credit Limit on Your Credit Card Can Impact Your Life

When you first apply for a credit card with little or no credit, the usual credit limit is $500 or $1000. As you use the card and make your payments on time each month, the credit card issuer will gradually increase the limit. Over time, this limit could be quite high giving you access to a lot of money when you need to make a major purchase or even take a well-deserved vacation.

A high credit limit on your credit card can help to make life a lot easier when you have money at your fingertips in emergency situations. Being financially responsible in such a case is a necessity in that you make sure you do always have funds available that you can use when you need them. You will then have a reserve of funds available to you if a need arises for which you do not have cash in your savings or checking account.

An increase in your credit limit also has a positive effect on your credit score. Rather than use your credit card, you may decide to apply for a loan that carries a lower rate of interest. When a lender views your credit report and sees the limit that you have and that you have been diligent in making your payments, this gives you more borrowing power. Experts recommend that in order to maintain a high credit rating when you do have a high credit limit on your card is that you should not have a balance that is more than 40% of this limit.

Another advantage of having a high credit limit is that you will be seen as a responsible borrower and receive low interest rates on any other loans. You may also qualify for a wider variety of loan products and may not have to put as much money down on loans as you would have if you had a lower credit limit.

There are disadvantages, however, to having a high credit limit. The fact that you have a large amount of money at your disposal can lead to impulse spending and thus leave you in difficult financial straits. In today’s economic difficulties more and more people are finding themselves in financial difficulty because they are unable to make the monthly payments because of the high interest required the balances. Credit card debt is one of the leading causes of bankruptcy and is becoming more and more common.

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