How to increase your credit card limit

Use this guide to find out how to request a credit limit increase with your bank and learn some tips to improve your chances of approval. Before making a request, you can also compare the reasons why you should or shouldn't ask for a credit limit increase based on your own circumstances.

What should I consider before adjusting your credit limit?

When you first get a credit card, your bank or provider will usually assign you with an affordable credit limit for your circumstances. This limit is based on factors in your credit card application including your income, expenditure, existing debt and credit score or credit rating.

If you get a credit limit that's too high, you'll increase the risk of overspending and ongoing debt. Submitting a request for a credit limit increase also impacts your credit history. So before deciding if you want a credit limit increase, it's a good idea to consider whether or not these circumstances have changed.

Consider the following reasons why you should or shouldn't request a credit limit increase for more information.

Reasons why you might want to adjust your limit

• Increased spending potential. You’ll have greater spending power because you can make larger purchases without going over your existing credit limit and potentially being charged a fee.
• Greater rewards earning potential. If you have a frequent flyer or rewards credit card, you may be able to earn more points with a larger credit limit.
• Emergency funds. You’ll have a bigger safety net in case of an emergency.

Reasons why you might not want to adjust your credit limit

• If you have a bad credit history. When assessing your application, the bank will make an inquiry into your credit history. This credit inquiry is then recorded on your credit report and can negatively affect your credit score.
• Potential rejected application. If your request is denied, it will impact your credit score and you’ll have to wait longer before your next application. Lenders tend to get suspicious when they see many credit inquiries made within a short period of time listed on your credit report.
• Meeting monthly repayments. A higher credit limit and larger debt will increase the minimum repayments you have to pay each month.
• Increased debt risks. Having more credit could increase your spending and lead to more debt if you’re not disciplined and repay your account in full each month.

How to increase your chances of being approved for a credit limit adjustment

• Use your card regularly. Card providers generally favour cardholders who use their cards frequently and pay off their balances on time. This shows them two things: that you have a need for a higher credit limit and that you can handle credit responsibly.
• Make payments on time and pay your balance in full. Timely payments can improve your chances for approval because they show the bank that you are a responsible and low-risk borrower. Paying off the full balance also shows the bank that you’re capable of managing a higher credit card limit.
• Optimise your credit score. Always protect your credit score by making payments on time. Even late payments on phone and utility bills, car loans or personal loans can hurt your credit report and deter the bank from increasing your credit limit. You can get a free copy of your credit score and review your report through Finder.
• Don’t ask too soon or too often. Unless otherwise stipulated, credit card providers typically review your account after six months. Asking before that time could raise alarm bells and hurt your chances of a future credit limit increase. Asking again too soon after a previous request can have a similar outcome.
• Don’t ask for too much. Prudence can go a long way when it comes to requesting a credit limit. It is better to ask for a conservative 10-25% increase than to wildly shoot for more. Unless your circumstances have drastically changed, your request should be capped at 30% more than your current limit.
• Apply for a card with a high minimum credit limit. Premium credit cards typically offer higher minimum credit limits than standard cards. If you meet the eligibility requirements for these cards, you could compare your options and apply for one that suits your spending habits and needs.

Even if a credit limit increase isn’t on the cards for you yet, all the above suggestions are good habits to practice. The underlying principle is to establish a healthy credit history by borrowing and repaying responsibly. A credit limit increase may be good to have as long as it doesn't increase your spending dramatically or negatively impact your ability to repay. You should only apply for a credit increase if you can afford it and spend responsibly.

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