One of the first steps to managing your credit card spending is deciding your credit limit. Most everyone knows that the credit bureaus will determine the limit by looking at your credit report. But how much should that limit be?
This will depend on several factors, such as your current balances, how much is charged in interest (on average), and your income. But overall, credit limits should be around $10,000. If you create a credit card comparison website, you can easily show you would have to have a limit of just over $9,000. Pay your balance in full each month, and you will not exceed the limit.
To get that item, you will need to prove you are employed by one of the major credit card companies and make payments for the up-front charge, which could be anything from $200 to $700. That’s why your credit rating is so important. If you have a bad credit rating, you will not get that limit. Let’s say you have a limit of $9,000, and you spend $1,000 a month on credit. It’s pretty simple. You have to pay the representatives $200 to $700 each month to continue their support.
If you do not lift your payments as a one-time charge, the higher cost can cause your credit limit to drop. A while back, this happened to me, and I didn’t notice until I was turned down for a new card. But to be approved for a new card, you can only have an existing card with 30% in spending. So, in this case. The card that I was approved for had a $1,000 limit with a $300 balance. I spent $300 a month on credit after the limit had been increased due to my new card.
Because the card I was approved for had a substantial limit with lower spending, I required another one of the people to re-confirm the credit limit before signing the contract for the card I was about to receive. That person never checked to see if my existing cards were approved. You would think they would have done this and told me what limit I qualified for. But I didn’t receive the limit increase I was being asked for. At the time, I figured that this is standard contract procedure at credit card companies. Sometimes it works out that way, but it does not always.
I figured that something was amiss, and I was being taken advantage of. The next day, I called the credit card company back and stated that I was being declined for one reason, and since I didn’t have the extra cash to increase my spending, I was going to cancel the card and pay it down. I was not cut off or told that I was over the limit. They informed me that I was declined. They didn’t care. That’s when it became apparent that maybe this card is not a good one for me. It was too much money.
I have also read some of the credit card company contracts, and during the contract term, it stated something like, “If you charge up to $300 on this card…aser today and 15 days later, we will approve you for a higher limit.” I have no idea how this could happen, but it did. Here’s the thing though, this was an unsecured card from a major credit card company. So, if I went over, I had no problem because it was a department store card that was only good at the department store. With a significant card, I had the option. I could overspend and only be charged 30 dollars. Since I knew I would keep spending and only pay the minimum payment or no payment at all.
I kept spending until I only had a little money left or endorsed a $300 limit. Here is the catch: when you only have a small amount available, you start thinking about ways to charge more. You begin establishing a relationship with the store where you can only buy one or two things and begin to give you other and higher limit and lower minimum payments. I’m not saying it shouldn’t be raised, but ineffective and reckless expenditure plastic cards are not worth the trouble.
My advice, only charge what you can afford to pay for in the next 30 days. Call the company and find out if you have the option before you accept or sign the account papers. If they don’t explain the terms of credit before you sign, you can get a free copy of just your credit reports. After you have done this, you have the chance to go back and explain, well, you along with the terms of credit if you don’t, or at least (IM rounding that) ask for a lower limit.