The Pros and Cons of High Credit Limits

by : Court Tuttle

Credit card limits are almost completely to our discretion. Companies give us the options of taking our credit limits to the top, allowing almost no limit. Perhaps, for some, this is a good thing.

In many cases this would be arguable, though, because of the difficulty most people have paying off the debts they incur, even if they are within the credit limit. How high your credit card limit can safely be depends mostly upon whether or not you can discipline yourself to spend only the amount you can afford to pay back. But if the amount you can afford to pay back is less than your limit, is it really necessary to have a high limit in the first place?

Maybe it is not really mandatory that you have a high credit limit, and therefore a higher risk of overspending, if you don't feel that you would benefit from the advantages. Sometimes it is necessary though. For some people, the advantages may outweigh the disadvantages.

High Credit Card Limit Pros
1. It's more convenient to pay for bigger expenses.
2. Going over your limit is less likely when it's set at a high amount.
3. Money is close at hand for emergencies.
4. Paying your credit card dues on time and using credit often, but with discipline, can allow you to build on your credit score.

High Credit Card Limit Cons
1. You have a greater risk of high interest rates if you cannot pay your monthly credit card bills.
2. In case of theft, a high limit would allow for the wrong person to stack up your expenses.
3. It would be more difficult to keep discipline in your spending if you knew you could buy something that is beyond your affordability, but that is within your credit limit.
4. It may be less convenient, but more beneficial to just get credit in another way, like at bank or credit union.

Keeping Your Credit Limit Low Can Help Keep Debt From Piling Up.

High credit card limits can allow for high spending possibilities, but it can also allow for spending beyond your means. This can lead to unpaid bills, heightened interest rates, and excess debt that becomes more and more difficult to emerge from. In most cases, the best way to stay out of this situation is to keep your credit card limit at a low level, one that matches the amount that you can easily pay back.

Anything that you want that is more expensive than the amount you have within your limit is probably more safely purchased with a loan, or even with money that you save up. Most of all, it is important to not let your credit card debt snowball and get out of control, no matter what the reason for it might be. In most cases, keeping your credit card limit low and in a reasonable range of your payment ability is a beneficial way to keep such a snowball effect from occurring.