Pros and Cons of a High Spending Limit on your Credit Card

Credit cards are arguably a necessity. They are certainly more convenient than cash, at times, and offer other benefits, such as protection plans, perks, and delaying paying for the goods or services obtained until the monthly bill is due. Credit card companies tend to raise credit limits for certain consumers, whether the consumers ask for a higher limit or not. Frankly, having a credit card with a $50,000 limit is a bit alarming, not necessarily because the consumer is more exposed to fraud or theft, but because running up a balance that high is beyond most people’s ability to pay off quickly. Only the most affluent consumers can use a high spending limit on a credit card. Beyond that, any ‘pros’ to a high spending limit tend to be for the credit card companies and not the consumer.

Setting a budget is useful and sticking with paying off the credit card when the balance is due will have you made in the shade. I often wonder why people carry balances on their credit cards, other than for a true emergency. The interest paid to the credit card companies could have been used to buy other goods or services. So a lower limit may be beneficial for people who need some external form of discipline to avoid running up credit card debt. It will also make it more likely that you will look for a loan at a lower interest rate rather than using credit cards to finance debt. People have wants and needs now – and don’t always have the cash to pay for them. Credit card companies are more than happy to help fill the need to consume, but consumers, as usual, must be aware of the terms and conditions that credit card companies set. Credit card balances can quickly become uncontrollable, which is another convincing reason for a lower spending limit. It’s easier to pay off $2000 and sprialing than to pay off $20,000 and spiraling.

Another reason that a low spending limit on a credit card is nothing to worry about, in most cases, is that consumers can easily obtain more credit cards. I felt as though relying on one credit card could eventually cause a bad situation for me, were it lost or stolen. So I applied for a second credit card that I never use, but carry with me when I travel, and I always know where it is at home. Having one credit card as your ‘work horse’ and keeping one or more dormant until you really need them for some reason isn’t a bad strategy. So, not being able to obtain more than one credit card may make a good case for a higher limit on the one you have. Most people do not have that problem, however.

It pays to shop around for credit cards. The limit is usually the last item I look at, since I know the credit card company will probably raise the limit without my even asking after I hold the card for six months or a year, and based on your credit and payment histories, they probably will raise it much more if you call and ask. Consumers seem to be attracted to higher limits, due to status, power, or whatever other conscious or subconscious feelings higher limits evoke.

Debts can quickly outweigh the means of paying them, given how consumer-oriented our society is. A want can be quickly rationalized into a need, and we are so flooded with new goods and expanding services every year that almost no one could hope to enjoy them all. A higher spending limit is absolutely each consumer’s choice, given what the credit card companies will accommodate. It’s also the consumer’s obligation to make sure that the pleasure of higher spending limits doesn’t cause financial hardship for themselves or their families. Overall, the ‘cons’ of higher spending limits can outweigh the ‘pros’ considerably.