Master Your Card » Credit Cards

Tips for Credit Card Comparison Beginners

Sally Aquire — Thu, 02 Feb 2012 21:21:32 +0000

Not all credit cards are created equal, so it’s important to compare credit cards to make sure that you’re choosing the right one for your needs. It can be confusing to know how to compare credit cards, especially if you’ve never taken the time to do so before. Here are some things to consider.

What Do You Want from Your Credit Card?

There are various types of credit cards, so you need to think about what you’re looking to get from your choice and pick the right card for your needs. You also need to factor your money management into this. For example, do you make a point of paying off your balance in full every month? If you do, you’re not necessarily going to be after the same type of credit card as someone who is regularly carrying a balance over to the next month.

Credit Card Interest Rates

There are three interest rates to be aware of:

Balance transfer fees and interest rates which apply to debt being carried over from another credit card
Purchase interest rates which apply to purchases made using the credit card
Cash withdrawal interest and fees which apply to cash withdrawals made using your credit card at ATMs.

Many credit cards have introductory interest rates which revert back to the regular rate after a certain amount of time, so it’s important to check whether this is going to be the case. If you’re not necessarily intending to use your credit card straight away, look for one that is offering a low interest rate all the time, rather than one which only has low interest for a certain time period.

Interest Free Days

How long a time will you have between making a purchase and needing to pay for it? Typically, it is somewhere between 30 and 60 days. If you’re confident that you’ll be able to pay off your balance relatively quickly, a credit card like this may allow you to budget your spending without incurring extra credit card charges such as interest and fees.

Not all credit cards may have an interest free period on new purchases, though. There may be higher fees and interest rates on credit cards that offer a longer payment period but if you always pay your balance before it incurs any interest, this shouldn’t affect you.

Credit Card Fees

Some credit cards have an annual fee, which isn’t always a bad thing. Some credit cards that charge an annual fee may come with more attractive interest rates, or more appealing rewards, so don’t dismiss them out of hand.

Other fees to look at are cash transaction fees if you use your credit card to make cash withdrawals, and foreign transaction fees if you may be using your credit card abroad at any point. Watch out for any other credit card fees or charges, which won’t necessarily be prominently advertised. You should be able to find the small print on the credit card provider’s website or other documentation.

Credit Card Rewards

If you’re in the habit of using your credit card regularly and paying off your balance in full every month, interest rates are less of a factor, and you may be more interested in a credit card that rewards you for using it. However, rewards credit cards may have higher interest and fees attached. Rewards can come in a variety of forms, but points can often be redeemed for goods or air miles. Check if there are any restrictions on using these rewards.

Credit Card Fraud Protection

Check also whether your desired credit card offers protection against identity theft. Credit card fraud is becoming more and more common these days, and you’ll want to know that your credit card company will help you get things straightened out if you’re affected.

If you’ve never previously taken the time to compare credit cards, it’s definitely worth the effort to make sure that you’re choosing a credit card that suits your needs. Going for the wrong type of credit card may mean that you end up paying more in interest and charges in the long term. Think carefully about your typical approach to money management and let that influence the type of credit card that you opt for.

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Credit Card Introductory Offers: Zero Interest on Purchases

Brian — Thu, 26 Jan 2012 21:34:16 +0000

Need to make a big purchase? Along with introductory zero interest balance transfers, you may be be able to take advantage of a 0% APR offer for credit cards. Follow along as we take a look at some options here along with advice about how to use them.

Some 0% Purchase Interest Offers

Maybe you are ready to look at credit cards with a 0% APR period on purchases. If that is the case, consider some of the following cards.

One of the longest 0% APR periods I found in a quick online search was from Citi, on several of their credit cards including the Citi Platinum Select Visa/Mastercard, Citi Simplicity Card, and Citi Diamond Preferred Card.

The Capital One range of credit cards may also offer a lengthy 0% interest period on purchases to new customers. There are several other credit cards that offer an introductory 0% APR for 12 months. Indeed the latter period seems to be the standard.

In the ever-changing market of credit card offers, there may be new promotions every day offering special interest rates for limited periods to new customers. However, make sure you compare credit card offers to see what is the preferred option for you. After all, there might be some rather long interest-free periods available, but you’ll need to know more about the cards and their terms and conditions before you make up your mind.

Using Zero Interest Credit Card Offers

So, what should you do when you have your new credit card in your hands, with its tempting 0% APR on purchases?

These offers can be extremely helpful when you need to budget for big purchases. For instance, perhaps you are in the market for some new furniture, or you need to finance a wedding. If you could pay off the balance within the interest free period – or at least pay it off in a reasonable amount of time – you may be able to save money with this type of option.

Be careful, though. One risk is that you may not be able to pay off the balance within the promotional zero interest period. Thus, you will take on the standard interest rate for the rest of the time it takes you to pay off those purchases (and the interest you now begin to owe on them). This means you may not end up saving money after all, as you can imagine.

There is another risk, and again it is entirely your own responsibility to guard against this. During the 0% APR period, you might begin to spend more freely, knowing that you won’t be charged any extra – at least, not yet. However, while you think you’re saving money on the interest rate, you may be racking up greater debt overall. Don’t let a credit card get you into trouble; use them in conjunction with budgeting and money management.

Overall, zero interest credit card offers can be a nice way to pay for some shoppers, but they don’t suit everyone. If you start taking advantage of a zero interest credit card offer to make your new purchases, be very careful to keep an eye on your spending. You don’t want to end up in a worse position once that intro period ends.

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How You Think of Credit Makes All the Difference

Sabrina — Mon, 23 Jan 2012 21:24:26 +0000

Across the world, thousands of people every year find themselves drowning in credit card debt. That’s a serious problem, and it is a bad kind of debt to be in. The interest rates are high, and it may seem nearly impossible to dig yourself out. What can you do? Staying out of credit card debt in the first place is a great place to start.

But what’s the best way to stay out of credit card debt? Well, it really comes down to how you think about your card. There are plenty of people out there who have never carried a credit card balance, and there are plenty more who are up to their ears in debt. What’s the difference between them? In some cases, there is an emergency, such as an injury or car repair, that leaves you with no choice but to use a card. In most cases though, credit card debt is a choice.

How to stay out of debt

Getting rid of your cards, or never getting any, isn’t necessarily the answer. Some people may have to if they can’t learn to control their purchasing, but most can learn to use their card responsibly. And if you never get a credit card at all, you’ll miss out on an easy way to build your credit history. In fact, you may find yourself struggling to get any other type of loan if you have nothing else on your credit record.

So what can you do? Change the way you think about a credit card. Simply think of it as like a debit card instead. Would you spend money on your debit card that you didn’t have? Absolutely not. Would you use a debit card to impulse-buy that big-screen television or fabulous pair of shoes if you knew you didn’t have the money to pay for it? No.

An attitude adjustment

A credit card is not a mystic portal to a money tree where you can pick all you want. We need to stop thinking of plastic as non-money. Because when you add the interest you pay onto the price you charge to your credit card, it may be more money than you bargained for. Credit is really just a nice way to avoid carrying cash and build a credit history while you spend; plus it is a very nice option to have in an emergency.

So if you struggle with credit card spending, what you really need to do is realize that when you buy on credit, you’re just spending your own money. And what’s more, you’d better have the money to pay with at the end of the month, or your $500 shopping spree may turn into $570 in what seems like the blink of an eye.

The way I see it, it’s time we gave up continuous instant gratification, rampant impulse spending, and the belief that we deserve to live in luxury every hour of every day. One more cup of coffee, pair of shoes, or video game will not fix what ails your life. Spending wisely and learning to be happy with what you have, however, just might be a step in the right direction.

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Are Credit Cards Rewards Worth the Risk?

Owen Richason — Thu, 19 Jan 2012 21:54:56 +0000

Imagine that you signed up for the latest credit card offer sent to you in the mail, wanting to take advantage of the appealing, lucrative rewards program. After all, you certainly spend enough to earn countless air miles, and a little holiday would be a nice reward indeed. But you pause just before signing on the dotted line. Is this rewards program really worth it?

Credit Card Rewards Differences

Most consumers know there are substantial differences to credit card rewards programs. There are cash-back rewards, airline miles and gift redeemable rewards programs. Each appeals to consumers in a different way.

Those who travel often will get the most bang for their buck by choosing airline miles or discount fares. Others who do not travel frequently will but rely on their credit cards for regular, everyday purchases will get the most out of cash-back rewards. Consumers who use their credit card sparingly might find gift rewards the best fit. The point is that your lifestyle and spending habits should dictate your choice of credit card reward program, if you choose to use one at all.

The Truth about Credit Card Reward Programs

As with any enticement offered by banks and credit unions, there’s a reason credit card issuers dish out these rewards programs. It’s not just because of their good nature or to spread goodwill among mankind, it is yet another tactic for separating consumers from their money.

Banks and credit unions offering credit cards with rewards are counting on the likelihood that some consumers will overspend to reach their goal of earning those rewards. They are making a calculated bet that consumers will spend more to get more rewards. And that isn’t a good financial strategy for consumers!

The Rewards Game

Sure, spending money to get money back doesn’t sound like a bad idea. It’s almost like paying less for the same item. But those purchases may not equate to eternal rewards as and when you want them. Consumers should read the fine print. That’s where expiration limits and other important conditions are to be found.

Not only do the points eventually expire, making redemption impossible on outdated reward points, but what about other expenses? Even if a consumer spends enough to get a free round trip airline ticket , what about their accommodations or travel insurance? Will those same reward points put extra cash in your pocket to spend while on holiday? Then there’s the cost of meals and car rental – the list goes on. What seems like a good deal might not come to fruition when all the extras are tallied-up.

Cash back rewards may likewise be less of a great deal that they seem at face value. The amount a consumer gets back may be dwarfed by the related credit card interest payments.

Do your research and choose wisely; you could use an online comparison tool to determine which rewards program is the best fit for you personally. You might find several or just a few. If you decide to apply for a reward credit card, be sure not to base your decision solely on the rewards but also on interest rates and fees.

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Credit Card Introductory Offers: Zero Interest on Balance Transfers

Brian — Mon, 16 Jan 2012 21:26:19 +0000

When it comes to saving or spending money, a credit card is a common choice. Zero interest balance transfers provide a potential way to save on the interest charges that plague consumers. But how useful are these offers? And which credit cards are best for this? Follow along for more on zero interest offers with credit cards.

Current Credit Card Offers

At the time of this article, there are a number of credit cards that offer attractive zero interest offers on balance transfers. You might decide to take advantage of these introductory balance transfer rates if you need to manage your credit card debt.

Currently, the best choice for zero interest offers are those that have a period of 21 months. This includes the Citi Platinum Select Visa/Mastercard, Citi Simplicity Card, Citi Diamond Preferred Card, and others that are available. Note that these all require excellent credit, which is what one would expect when approaching the best introductory offers, in this case concerning balance transfers specifically.

Otherwise, 18 months may be the best alternative, as seen with the Discover More Card. The Capital One Platinum Prestige Credit Card is also not a bad option, with the period ending in January of 2013. 12 months on balance transfers is quite common and still reasonable, as you will find with many credit cards.

Of course, these offers are subject to change and this selection does not represent all competitive options. You may certainly find something comparable or better than what is listed.

Usefulness

You may be considering some of these balance transfer offers. Are they worth it? How do you use them effectively?

The big questions can be generally answered, but you must put weight on what matters to you. For instance, if you are worried about saving money on overwhelming interest charges on your existing balance, you might be focused on the interest free period, and not too worried about the interest rate on purchases if you don’t intend to make many.

If you are chipping away at debt, a credit card with a good interest free balance transfer period is worth considering. You might be able to do this with high-interest cards whose balances you are trying to reduce. After all, the difference in interest costs may be quite noticeable if you have thousands of dollars in balances.

A zero interest balance transfer credit card may help you to save on interest charges while you work on your debt. You will need to have a goal, and a plan to meet it, for example a budget and an idea of how much you can pay off that transferred balance during the zero interest period. Be aware that if your transferred balance is still not paid off by the end of the introductory period, you will be obliged to pay the interest rate stated in your credit agreement for the outstanding amount transferred until you have finished repaying it.

Overall, balance transfer offers can be a powerful tool in combating high interest rates. However, be careful in using these offers – don’t let that small minimum payment relax you into prolonging your overall debt.

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Common Credit Card Myths and Misconceptions

JE Cornett — Thu, 05 Jan 2012 21:30:50 +0000

The world of credit cards is murky to many of us — danger may seem to lurk around every corner, and even the best credit card has the potential to be deadly to your credit score. Your best defence against making credit card mistakes is knowledge, and understanding some of the most common myths and misconceptions about credit cards can help you know what you need to manage the plastic in your wallet.

Misconception: As Long As I’m Making the Minimum Payment, I’m Okay

If you think that making only the minimum payment toward your debt is okay, you’re under the spell of one of the biggest credit card misconceptions. While making the minimum payment only will keep your credit from suffering, it really doesn’t do much to reduce your debt.

Skeptical? Consider this example: if you have a credit card with a balance of $5000 and an interest rate of 18%, and your minimum monthly payment is $125, it will take you 273 months, more than 22 years, to pay off that $5000. But that’s not the worst part – in those 22 years, you will have paid a whopping $6,923.14 in credit card interest!

Now, say you pay $175 dollars each month toward that debt. The monthly difference to your pocketbook is only $50, but in the long run, but the big difference? It will take you only 38 months to pay off your credit card debt, and you will pay $1,578.01 in interest, saving yourself over $5000.

Myth: Carrying Balances on Credit Cards is Bad for My Credit Rating

This one’s a bit tricky. Carrying balances on your credit cards may be a bad idea, but not for the reason you might think. As long as you’re making regular payments (of at least the minimum payment, of course) toward your credit card balances, you’re not necessarily hurting your credit – that is, until your balance hits your credit limit.

The closer your balance creeps toward your credit limit, the worse it looks for your credit score. However, the damage done to your credit limit is nothing compared to the damage done to your pocketbook. Carrying balances on credit cards is expensive, costing you more than you may be able to afford in interest fees. So, carrying a balance is worse for your finances than for your credit.

Misconception: Having Credit Card Debt is Bad for My Credit

It’s not really credit card debt that’s bad for your credit – rather, it’s how you’re managing that debt that may leave a poor impression. If you have three credit cards, on which you are carrying balances that are well under the credit limit, and you are making at least the minimum monthly payment on each card every month, you’re actually helping your credit, because you’re establishing a credit history that shows that you are using credit responsibly.

On the other hand, if you have three credit cards that are maxed out, and are missing payments or making them late, then yes, having credit card debt may be bad for your credit, because you’re showing lenders that you can’t be trusted to repay a debt as agreed.

Myth: It’s Impossible to Pay Off High-Interest Credit Card Balances

This one is a complete myth. It is possible to pay off high credit card balances and those with high interest rates, but in order to do so, you must be willing to get serious about putting a good portion of your income toward your debt repayment strategy. If you really want to pay off your credit card debt, you will probably need to commit to paying more than the minimum payment every month, even if it means taking on a second job or cutting your luxury expenses to the bone.

Don’t be taken in by these mistaken ideas about credit cards – used responsibly, they may be of benefit, and with a little dedication any credit card debt may be managed and reduced.

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Good Times to Use Your Credit Card

Amanda — Fri, 25 Nov 2011 07:39:51 +0000

Credit, when used correctly, can play a significant role in your finances. Maintaining a good credit rating doesn’t only help you build wealth; it also shows creditors that you are trustworthy. That way when it comes to big ticket items – like a mortgage – lenders may offer you lower interest rates.

At the other end of the spectrum, credit may create huge financial problems if mismanaged. Most people already know that using credit for impulse shopping sprees or basic living expenses like groceries can be risky, as it increases your debts, but what a lot of people don’t know is that there are some cases where it may benefit you to use your credit card.

Below you will find a list of instances when you might decide it’s worth using your credit card. It’s often a good idea to ensure that you have some or all of the necessary funds in your current account when you make your purchase, even if you intend to put it on credit and pay later. That way, you know you’re less likely to struggle with the credit card bill when it arrives.

Big-Ticket Purchases

Buying a high value item such as a large household appliance on credit –and then paying it off quickly– shows lenders that you can pay off something large without needing to struggle. Your credit card may also provide an extended warranty or other types of consumer protection that you would not receive if you paid by cheque, cash or direct debit.

Driving Expenses

As a general guideline, basic amenities like petrol should not be put on credit too often as the costs may add up to quite an increase in your debt. However, since you might buy petrol regularly from many different locations, it may be a good idea to use a credit card. This will help you keep track of your fuel expenditure, and may be more secure than some other payment methods too.

You may also choose to pay larger car-related expenses such as your car insurance premium or major repairs and services via credit card, especially if your credit card currently offers 0% interest on purchases.

Tickets and Hotels

Travel tickets and hotel stays are two things that it may be advantageous to put on credit. The reasoning behind this is that airlines and hotels typically take your credit card details and confirm your credit at the time of purchase, but don’t take the money from your credit account until the start of your trip – meaning the charge may not show up on your account until later.

Putting tickets and hotel stays on credit cards may therefore give you a longer period of opportunity to cancel a trip, or make a complaint, before your account is charged. This can be much less complicated than having to make a claim on your travel insurance later on.

Bonus fact: If you have reward credit cards, there are often reward points available for travel and accommodation!

Landscaping and House Repairs

Imagine contracting a landscape company, only to find that the new grass they put in begins to wilt after a few days. Or, imagine hiring a repair man who ends up breaking something in the process of fixing your toilet. If you put these expenses on credit, the credit company may help you to reclaim the cost if they do a bad job. If you pay in cash or with a check there’s no way to absolutely guarantee getting that money back.

Automated Payments

Automatically-paid regular expenses such as gym memberships and cell phone contracts can be worth putting on a credit card, too. Again,the main reason for this is that the credit company may help to uphold your consumer rights and help you obtain a refund in the case of any complaints that are not resolved by the original service provider.

Credit – when used correctly – can get you out a financial bind and increase your wealth, as well as offering added consumer protection on some purchases. Using your credit in situations like those mentioned here may help to give you peace of mind about large purchases or regular smaller expenses.

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Did You Know These Credit Card Tips?

Amanda — Mon, 07 Nov 2011 03:41:14 +0000

Credit ratings can quite literally run your financial life – especially these days, as banks try to recuperate from a financial crisis that affected the global economy. Other companies and creditors are also playing it safe when it comes to a person’s credit, because they take on great financial risks with their business dealings. In other words, you really need to be on top of your credit game these days if you want them to consider you worth the risk.

If your credit rating is poor, it can prove difficult to get a loan, get approved for a mortgage, and in some cases even get hired for a job. Meanwhile, building and maintaining an excellent credit rating can open the doors to a wide array of financial opportunities – you’ve proven that you’re financially responsible, so creditors and other companies want to do business with you.

The Credit Card Dilemma

While loans and mortgages can greatly affect your credit rating, it would seem that the biggest credit rating damage culprit would be credit cards. The reason for this is obvious: it’s easier than ever to get your hands on a credit card. Credit card debt is also sometimes seen as a “bad debt”, while a student or business loan isn’t seen in such a poor light because they can help you further your career and thus your financial standing.

Credit card debt has become a common phenomenon as individuals around the world struggle with mounting debt. In 2010 it was reported that Australians lead the world in credit card debt, surpassing their American counterparts.

The easiest way to avoid this situation is by paying your card in full and on time every month. However, there are also a few other things you can try to ensure that your rating stays where it’s supposed to.

Pay Credit Card in Full Two Weeks Before It’s Due

Credit bureaus send monthly balances to banks, institutions and credit rating companies. If you pay your card two weeks before it is due you not only ensure that your payment was made on time, your monthly balance will also show up as zer0.

Do Not Open More Than Two Credit Cards a Year

Simply put, this makes creditors nervous. If you go on a credit card spree it looks like you are going to borrow a lot of money you don’t have. By the way, retail cards count as credit cards.

Only Check Your Credit Rating Once Every Six Months

If creditors notice that you are checking your credit rating often, they may get the impression that they have something to worry about. In other words, they might assume that you’re watching your credit score like a hawk because it’s either about to take a dip or you are trying to bring it up.

Do Not Use More Than 50% of Your Credit Limit

Your credit rating may take a dip if you use more than 50% of your limit. It’s one of the tell tale signs to creditors that you’ve taken on a large amount of debt you may not be able to pay off.

Credit ratings don’t have to be complicated – just make sure to practice these responsible finance tips and you’ll be confident that you can keep your credit score in great condition.

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Crash Course in Credit Cards

Pam — Thu, 27 Oct 2011 17:08:51 +0000

With few people paying in cash, and credit cards seeming to be the payment method of choice for many, you might think everyone knows all they need to know about credit cards. But the truth is that while many people use them, not everyone really understands the basics of how credit cards work.

From interest rates to monthly statements, it’s important to understand credit cards before you start using them. If you’re already using credit cards, you should make sure you understand this method of payment you’ve been using.

Types of Credit Card

The two main types of credit cards are general label and private label. General label cards can be used at any participating outlet, while private label cards can only be used at the business that issues the card.

Most credit cards are unsecured, which means you are extended a line of credit based mainly on your credit history or income. Although these can be very handy, they are also the cards that might get people in trouble. Just because a credit card company extends you a $10,000 line of credit, that doesn’t mean you have the ability to pay that much back.

Secured cards, on the other hand, are backed by funds you have put in an account. These types of cards are good for those trying to rebuild their credit after financial troubles.

Credit Card Fees

There are many fees associated with credit cards and some even charge an annual fee just to carry the card. Other fees include those for balance transfers, cash advances and late payments. Unless the benefits are worth the extra cost, you might decide to avoid credit cards with an annual fee, and that ones that charge unusual fees. Always check the fine print and your monthly statement so you know what fees you are being charged. If you have questions, call your credit card company.

Credit Card Interest Rates

The interest rate on a credit card is the rate at which interest is paid by the
borrower for the use of the money borrowed from a lender. First of all, if you
are using a normal credit card, it is like borrowing money. You may feel like
you’ve paid for an item after the cashier swipes your card and hands you a
receipt, but really, you haven’t paid; your credit card provider has.

Most credit cards have a grace period in which no interest is charged. Usually, if you pay for your purchase in the month after you buy it, no interest is charged. However, after that, the interest begins to add up quickly and the longer you take to pay it off, the more you end up paying.

Interest rates vary greatly on credit cards, ranging from 0 percent to more than 30 percent. The rate depends on things like your credit score, current debt, income and so on. Sometimes a credit card will offer a limited time interest rate which will change to a higher rate after a certain time.

Minimum Credit Card Payment

The minimum payment is the lowest amount you can pay on your monthly bill without breaking your contract with your creditor. The minimum payment is not the total amount you owe. In fact, it is usually only a fraction of the amount you owe. If you pay only the minimum payment on your card, you will be charged interest on the rest of the amount you owe.

For example, say you’ve charged $2,000 on your credit card and you pay the minimum payment of $100 each month. At an interest rate of 18.9 percent, even if you don’t make any more purchases on your card, it will take you 25 months to pay off your card and you will end up paying over $400 in interest.

Monthly Statements

Each month, you will receive a statement from your credit card company.
Although you may be tempted to just pay the amount due or minimum payment, take time to look at your credit card statement. Information on it will include your interest rate, minimum payment, balance (the total amount you owe), your credit limit (the maximum amount you may charge) and any fees.

The statement will also list all your purchases and it is sensible to go over everything to make sure it is accurate. Always check the fees and interest rate to make sure you aren’t being charged more than you should be.

Credit cards can be very convenient to use and being able to charge something can be helpful if you are short on cash. But always keep in mind that whatever you charge, you must pay for. It’s easy to just go to the mall and buy all sorts of things with your credit card, but paying off the bill that comes later isn’t always so easy!

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Increasing Your Credit Limit: 5 Dangers

Emmie — Thu, 20 Oct 2011 16:15:10 +0000

We are all aware that credit cards come with a credit limit, and that abusing the limit may make or ruin the cardholder’s financial rating. The credit limit is the maximum amount of funds that an issuing bank will allow cardholders to borrow on a credit card.

The amount of your credit limit can be increased based on your credit rating. Banks tend to be more than willing to increase the credit limits of customers who have healthy credit ratings.

If you receive an offer to increase your credit limit in your mail by your bank, don’t be too eager to accept it. It is good to know that you have proven yourself to be a “risk-worthy” customer and are awarded with an increased spending power. However, think twice before you accept the enticing offer.

Here are 5 dangers of credit limit increase you should take note of:

1. Risk of Overspending

Cardholders should be aware that a credit limit increase comes with a drawback. Cardholders will be tempted to spend more than they ordinarily would, which means owing more money to the bank. If a huge balance is carried over, a high interest will be charged. Hence, it is essential to ensure that you spend only what you can afford to pay back, to avoid being trapped in an endless cycle of debt.

2. Limited Loan Availability

Having an increase in your credit card limit can be a disadvantage. Your loan application such as that for a mortgage can be hampered by a credit card limit increase, because you are considered as a “high limit borrower” from the bank’s point of view. This will affect a loan grant from the bank and ruin your dreams of owning a new home or car.

3. Higher Interest Fees

Increasing your credit limit also increases the chances of you not being able to pay your bill in full. This means that you have to pay more interest to the issuing bank.

4. False Sense of Security

Getting an increase in your credit limit may give you the impression that you can pay for any big-ticket items, like a home entertainment system or a home improvement project, at any time. While it is undeniable that you may feel financially secure as your credit limit increases, it is also true that your sense of security may be thwarted if you don’t monitor your spending strictly. Don’t be sucked into a vicious cycle of debt.

5. Higher Outgoings vs Income

The higher your credit limit, the more you’ll be tempted to purchase more expensive items. This results in higher monthly bills. If you fail to pay them off completely, carrying over a high balance may lead to higher interest charges. This could leave you in a situation in which you have to channel a large portion of your salary to pay off your bills, leaving you with little or even nothing for other expenses, including savings.

As you can see, an increase in credit limit may come with a price. It is imperative to take control of your expenses, track your monthly spending and have the right credit limit on your card to avoid the debt trap. Use your credit card to your advantage and be informed of the risks of credit limit increase before you decide to take up that tempting offer from your credit card provider.

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