Should I Ask for a Credit Limit Increase on My Credit Card?

Asking for an increase to your credit limit on a credit card can sometimes help you through an emergency situation, provide you with a safety cushion of extra available credit, and even help improve your credit score, but should you ask for an increase?  That depends.  If you’ve only had the credit card for a short time, it’s far better to wait until you’ve established a pattern of responsible use, including maintaining a low credit limit and making your payments on time, every time.  Once you’ve proven that, you’re more likely to be approved for the increase to your credit limit.  However, if you have a pattern of missed payments, or you’ve maxed out your credit limit, it is unlikely that you will be approved  for a credit line increase.

Some lenders will automatically offer credit limit increases once you’ve proven that you’re a responsible customer.  Beware of the fine print, however, as some credit cards carry a fee of up to one third of the increase for this additional credit.  And, you’re not obligated to accept the increase, either.  The bottom line is, you know what you can afford, you know your spending habits, and you know the course of action you need to take to stay on the right financial track for you.

Pandemic Credit Card Debt On the Rise

It’s no secret COVID-19 has taken an economic toll, and with so many people out of work, credit card debt has spiked.  A new survey indicates 47 percent of American adults are carrying credit card debt. That’s about 120,000,000 people, and that’s up 43 percent from early March.  The reality is that it’s become a lot harder to make ends meet and people are turning to their credit cards.  So, we’re turning to Lee Kendrick, a credit expert in the founder of credit u-turn, for some help on managing that debt.

The best advice used to be, don’t use your credit cards, but now, if you have to you got to do what you’ve got to do.  A few months in and people are already skipping their payments to make ends meet.  What should you do?  Should you go to the credit card issuer first and ask for a break?  If you have to, absolutely, and that holds true for mortgage lenders as well as automotive lenders.  Don’t procrastinate reach out to them immediately!

You typically do have some options.  Forbearance or deferment.  But, what’s the difference between the two?  Which is more favorable?  For the most part, when it comes to credit card lenders, forbearance really isn’t the same as it is for student loan borrowers and some other loans.  However, due to the Cares Act, there is a forbearance clause within that legislation, so whenever you reach out to your credit card vendors, you need to make sure that you understand whether or not they’re talking about a deferment option or a forbearance option.  When you enter into the forbearance, you’re still responsible for repaying accumulating interest as well as potential other fees that they’re charging.  The difference between the two is simply that deferment is always your better option because normally don’t have to pay additional fees, as well as additional accumulating interest charges.  Forbearance is usually a very short-term option, and often leads into other financial quizzes, such as whether or not you’re actually capable of repayment.  This could potentially cause them to lower your credit limits.  Forbearance does one have more of an impact on your credit score because any time that you’re accumulating those additional fees and interest, that can actually affect your utilization ratios as those balances increase.  But, here’s the other problem: credit card companies are slashing credit cards limits, with no warning to you.  So, you need to be proactive whenever it comes to that. 

One of the first things that we recommend is to look at what all of your available options are.  What are your own resources?  Do you have money that you would normally reserved for investment strategies, whether it’s your 401K,  IRA, or in stocks, bonds, or even just have a family member or you’ve got a relationship with?  A lender that can help you pay down those balances?  Whenever you pay down those balances, you’re eliminating your the risk to those credit card vendors and those credit card vendors are less likely to lower your credit limits.  Why?  Because you are able to pay those balances down and you’re demonstrating that the current pandemic is not affecting you.

If this is not an option, you may have to do some credit cleanup later on, but we fully expect that there will be some allowances made in the future for pandemic debt accumulations.  We’re just now sure what those will be at this point.

Budgets, Taxes & Your Fresh Start

Once again, it’s tax time in the USA, and even though you’re digging through all of your receipts, statements, and paperwork from last year, it’s never too early to start thinking about this year!   If you’re like most people, as you go through all those papers, you’re looking at what you spent on things like groceries, electronics, utilities, and credit cards, and it can get pretty depressing.  You look at all those payments, and you start thinking that it’s really hard to ever get ahead when you’re paying so much interest every month.  You wonder if you’ll ever get everything paid off so you can relax and maybe even have a little bit of money left over in your budget at the end of each month.

Well, 2019 just might be the year that you are able to do that, if you’re ready to take the bull by the horns and make a few smart moves with your credit cards!

First and foremost, if you ever want to get them paid off, you’ve got to stop using them!  Gather up all your credit cards, take them out of your wallet or purse, and put them away.  That’s right, put them away.  Put them in a box, file, or on a shelf, but don’t carry them around any more.  If you don’t have them with you, you won’t be able to use them for those impulse buys!  And, chances are, if you have to go home to get one of your credit cards, you won’t go back to the store and use it.

Secondly, you’ve got to make a plan to pay off the bills that you already have, and you have a couple of options to accomplish this.  You can utilize money you have in savings, you can consider balance transfer options with introductory rates, or you can take out a personal loan.  All three of these options have both pros and cons – using your savings can eat up the cash that you have on hand, and should you have an emergency expense later on, you’ll end up having to use a credit card to pay that expense.  Taking advantage of a balance transfer option on a new or existing card is a great option as long as you are able to pay the balance off within the allotted time frame – if not, you’ll face a huge interest charge when the introductory period ends.  And finally, taking out a personal loan does involve interest charges, but typically those interest rates are less than credit card interest rates, so you do save in the end.

Which option is for you?  While the balance transfer is a good option for those who don’t have much credit card debt to pay off, when you need to consolidate a lot of credit card debt, a personal loan is usually the easiest way to pay off everything, lower your monthly payments, and still keep your emergency cash in savings.

Think a personal loan is the right choice for your financial situation? Take a look at these lenders and see if one fits the bill:

Pay Off Your Credit Cards!

Drowning in credit card debt?

If you’re like the majority of Americans these days, you’re drowning in credit card debt simply because, with the current state of the economy, you don’t have the money to anything more than the minimum payment due each month, and then, as soon as you’ve paid a credit card balance down even a little, you end up having to use the credit card and you’re maxed out yet again!  It’s a truly vicious circle… and unless you do something, it’ll never change.

Relax… There is a better way to handle credit card debt!

With a personal loan, you pay off all those high interest credit cards, and you make only one payment each month for the term of your loan. Since the interest rate is usually drastically lower, you’ll pay less each month AND you’ll be able to pay the loan off sooner than you would have been able to pay off the credit cards.

Unlike debt consolidation companies, personal loans will typically improve your credit score because you’re actually paying off your credit cards, not negotiating for reduced payments, lower interest rates, and so forth.

But, what if your credit is not perfect?

Even if you’ve had a financial setback, you may still qualify for a personal loan!  If you’re serious about getting out of debt, and you meet the loan company’s criteria, then a personal loan is an option that is definitely worth seriously considering: