Negatives to increased credit card spending limit? [duplicate]
The only drawback is if you spend more than you can with the new limit and end up having to pay interest if you can't pay the balance in full. Other than that, there are no drawbacks to getting a credit increase.  On the flip side, it's actually good for you. It shows that the banks trust you with more credit, and it also decreases your credit utilization ratio (assuming you spend the same). There is another drawback, and this is why I keep a low-limit card for online purchases and another for carrying in risky/unfamiliar situations (e.g. travelling) a small limit acts as as damage limitation in the event of theft. In theory you may not be liable if your card is stolen and used.  In practice you may be out of pocket for a considerable amount of time, and trying to spend large sums on an overlimit card will soon trip it up (especially if those large sums are out of the ordinary) The one big drawback I know is when you take the mortgage credit, your credit ability is calculated, and from that sum all of your credits are subtracted, and credit limit on credit card counts as credit...  I don't know if it is worldwide praxis, but at least it is the case in Poland. "https://money.stackexchange.com/a/79252/41349 https://money.stackexchange.com/a/79261/41349  Adding to @Chris H answer about damage limitation Online purchases could include phone/tablet app purchases, which could be an issue if you have children or you are a victim of fraud. First link from googling ""Kid racks up almost $6,000 on Jurassic World in-app purchases"" Adding to @Michael C. Answer I think credit cards perhaps can make it more difficult to budget, if you are more lazy/have limited savings.  These might happen more long term if you don't keep track of your spending. I.e. If your credit limit matches your monthly income, and if you pay off your card each month, I think it is harder to overspend as you don't have more credit available than you can afford to spend. However this is countered by that, a slightly higher credit limit may help to avoid fees from exceeding your credit card limit. I think due to that some/not all purchases are instantly ""banked"", i.e. the shop might send all of its monies to its bank at the end of the day or something like this, so you can just keep spending not realising you have exceeding your credit limit and get hit by fees."
The old underwriting standards were 28% home debt to income ratio and 33% consumer debt to income ratio. Consumer debt is calculated based on minimum payments. Now, most models are revised upwards... I believe 33/38 is more common today.  As long as you are current on the accounts, closing credit or store revolving accounts will have little or no bearing. Just leave them dormant... there is no positive result from closing accounts that have no balance. Having low or no balances has NO negative impact on your credit score. Low balances are NOT red flags to lenders. Period. Here's a quote from Fair Issac: It's just not true that you can have too much available credit. That by itself is never a negative with the score. Sometimes the things you do to get too much can be a problem, such as opening a bunch of new accounts, but for the most part, that's just kind of an old wives' tale. The major drivers of credit scoring are: To improve your prospects for getting a mortgage, you should be reducing your spending and focusing 60/40 on saving for a down payment and paying down that $15k credit card, respectively. Having cash for a down payment is critical to your buying power, as zero-down loans aren't widely available in 2011, and a large downpayment will allow you to eliminate or reduce the time you are paying PMI. PMI reduces your buying power, and is a big waste of money. How will going from 75% Credit Utilization to 0% Credit Utilization affect my credit score? might answer your question if US based.  In the US, what counts is what shows on the bill. I've run $20K through a card with a $10K limit, but still ended the month under $2K by making extra payments. As long as you stay ahead of the limit by making mid-cycle payments, I see no issue with this strategy. If you keep running $30K/mo through a card with a $10K limit, the bank will eventually catch this and raise your limit as you will have proven you are more credit worthy. Credit scoring has changed since the time of this question (July 2017) and it is now possible that having a high available credit balance can negatively affect your credit score. ... VantageScore will now mark a borrower negatively for having   excessively large credit card limits, on the theory that the person   could run up a high credit card debt quickly. Those who have prime   credit scores may be hurt the most, since they are most likely to have   multiple cards open. But those who like to play the credit card   rewards program points game could be affected as well. source Your score is real-time, updating every time new data hits the reporting agencies. Dilip is correct, go over 20%, and it will hit the report, but then the score returns to normal after the next bill shows a sub-20% utilization.  Say your average spending is $1000, but your limit is $5000. There's no harm in asking for a small increase in the limit, or simply pay a bit toward the bill before the statement is cut. The bill and reported balance will be lower and your score, unaffected. I wouldn't say you should have any particular limit, but it can't hurt to have a higher limit. I'd always accept the increase when offered, and feel free to request it sometimes, just make sure you find out if it will be a hard or soft inquiry, and pass on the hard inquires. From my own experience, there doesn't seem to be any rhyme or reason to the increases. I believe each bank acts differently based on the customer's credit, income, and even the bank's personal quotas or goals for that period. Here is some anecdotal evidence of this: I got my first credit card when I was 18 years old and a freshman in college. It had a limit of $500 at the time. I never asked for a credit line increase, but always accepted when offered one, and sometimes they didn't even ask, and in the last 20 years it worked it's way up to $25K. Another card with the same bank went from $5K to $15K in about 10 years. About 6 years ago I added two cards, one with a $5K limit and one with a $3K limit. I didn't ask for increases on those either, and today the 5K is up to $22K, and the 3K is still at $3K.  An even larger disparity exists on the business side. Years ago I had two business credit cards with different banks. At one point in time both were maxed out for about 6 months and only minimums were being paid. Bank 1 started lowering my credit limit as I started to pay off the card, eventually prompting me to cancel the card when it was paid in full. At the same time Bank 2 kept raising my limit to give me more breathing room in case I needed it. Obviously Bank 1 didn't want my business, and Bank 2 did. Less than a year later both cards were paid off in full, and you can guess which bank I chose to do all of my business with after that. Credit cards and debit cards make up the bulk of the transactions in the US.  Visa and Mastercard take a percentage of each credit card transaction.  For the most part, this fee it built into the price of what you buy.  That is, you don't generally pay extra at the grocery store if you use a credit card (gasoline purchases are a notable exception here.) If you were getting something like 2% of a third of all the retail transactions in the US, you'd probably not want to rock the boat too much either.  Since there is little fraud relative to the amount of money they are taking in, and it can often be detected using statistical analysis, they don't really stand to gain that much by reducing it through these methods.  Sure they can reduce the losses on the insurance they provide to the credit card consumer but they risk slowing down the money machine.  These companies want avoid doing something like reducing fraud by 0.5% revenues but causing purchases with the cards drop by 1%.  More security will be implemented as we can see with the (slow) introduction of chip cards in the US but only at a pace that will prevent disruption of the money machine.  EMV will likely cause a large drop in CC fraud at brick-and-mortar stores but won't stop it online.  You will likely see some sort of system like you describe rolled out for that eventually. Every reward program has to have a funding source. If the card gives you x percent back on all purchases. That means that their business is structured to entice you to pump more transactions through the system. Either their other costs are lower, or the increased business allows them to make more money off of late fees, and interest. If the card has you earn extra points for buying a type of item or from a type of store (home stores improvement in the Spring), they are trying to make sure you use their card for what can be a significant amount of business during a small window of time. Sometimes they cap it by saying 5% cash back at home improvement stores during the spring but only on the first $1500 of purchases. That limits it to $75 maximum. Adding more business for them, makes more money for them. Groceries and gas are a good year round purchase categories. Yes there is some variation depending on the season, and the weather, but overall there is not an annual cliff once the season ends. Gas and groceries account for thousands of dollars a year these are not insignificant categories, for many families are recession proof. If they perceive a value from this type of offer they will change their buying behavior.  My local grocery store has a deal with a specific gas station. This means that they made a monetary deal. Because you earn points at the grocery store and spend points at the gas station, the grocery store is paying some compensation to the gas station every time you use points. The gas station must be seeing an increase in business so theoretically they don't get 100% compensation from the grocery store.  In cases where credit cards give airline miles, the credit card company buys the miles from the airline at a discount because they know that a significant number of miles will never be used. Incredible article, tons of data. Thank you!   It does answer the above posters question if you're willing to read through. It provides data with and without 'revolving debt'.  Side note; interesting to see how age and income trend. Debt increasing during the family-middle aged years, and during the peak income earning years.  I'd say you want these credit card debt lower overall and on average; but with the distribution it may be sustainable. Personally the main disadvantages are perpetuation of the credit referencing system, which is massively abused and woefully under regulated, and encouraging people to think that it's ok to buy things you don't have the money to buy (either save up or question price/necessity). Unless a study accounts for whether the users are following a budget or not, it is irrelevant to those who are trying to take their personal finances seriously. I can certainly believe that those who have no budget will spend more on a credit card than they will on a debit card or with cash. Under the right circumstances spending with cards can actually be a tool to track and reduce spending. If you can see on a monthly and yearly basis where all of your money was spent, you have the information to make decisions about the small expenses that add up as well as the obvious large expenses.  Debit cards and credit cards offer the same advantage of giving you an electronic record of all of your transactions, but debit cards do not come with the same fraud protection that credit cards have, so I (and many people like me) prefer to use credit cards for security reasons alone. Cash back and other rewards points bolster the case for credit cards over debit cards. It is very possible to track all of your spending with cash, but it is also more work. The frustration of accounting for bad transcriptions and rechecking every transaction multiple times is worth discussing too (as a reason that people get discouraged and give up on budgeting). My point is simply that credit cards and the electronic records that they generate can greatly simplify the process of tracking your spending. I doubt any study out there accounts for the people who are specifically using those benefits and what effect it has on their spending. It is an issue of both utilization and average age of accounts. If your cards with $0 balances on them are: A) newer cards than the ones you are carrying balances on and you don't want them B) much lower limit cards than the ones you are carrying balances on then you can raise your score by closing them, as the utilization change won't be a large factor and you can raise the average age of your open accounts. 1- To max out rewards. I have 5 different credit cards, one gives me 5% back on gas, another on groceries, another on Amazon, another at restaurants and another 2% on everything else. If I had only one card, I would be missing out on a lot of rewards. Of course, you have to remember to use the right card for the right purchase. 2- To increase your credit limit. One card can give you a credit limit of $5,000, but if you have 4 of them with the same limits, you have increased your purchasing power to $20,000. This helps improve your credit score. Of course, it's never a good idea to owe $20,000 in credit card debt. The credit limit is not going to be the problem; the daily spending limit is more likely be tripped first. I'm not a lawyer but if you are not responsible for the credit card details being leaked it is very unlikely that the bank will be able to charge you for fraudulent spending on the card. The important thing is to notify the bank as soon as possible once you realize there is a problem and if practical keep evidence of that notification, it will then be the banks problem to fix. From my understanding Singapore has relatively good consumer protection and it is unlikely the bank will get very far even if they try to charge you. "Others have commented on the various studies. If, as JoeTaxpayer says, this one particular study he mentions does not really exist, there are plenty of others. (And in that case: Did someone blatantly lie to prove a bogus point? Or did someone just get the name of the organization that did the study wrong, like it was really somebody called ""B&D"", they read it as ""D&B"" because they'd heard of Dun & Bradstreet but not of whoever B&D is. Of course if they got the organization wrong maybe they got important details of the study wrong. Whatever.)  But let me add one logical point that I think is irrefutable: If you always buy with cash, there is no way that you can spend more than you have. When you run out of cash, you have no choice but to stop spending. But when you buy with a credit card, you can easily spend more than you have money in the bank to pay. Even if it is true that most credit card users are responsible, there will always be some who are not, and credit cards make it easy to get in trouble.  I speak from experience. I once learned that my wife had run up $20,000 in credit card debt without my knowledge. When she divorced me, I got stuck with the credit card debt. To this day I have no idea what she spent the money on. And I've known several people over the years who have gone bankrupt with credit card debt. Even if you're responsible, it's easy to lose track with credit cards. If you use cash, when you take out your wallet to buy something you can quickly see whether there's a lot of money left or not so much. With credit, you can forget that you made the big purchase. More likely, you can fail to add up the modest purchases. It's easy to say, ""Oh, that's just $100, I can cover that."" But then there's $100 here and $100 there and it can add up. (Or depending on your income level, maybe it's $10 here and $10 there and it's out of hand, or maybe it's $10,000.) It's easier today when you can go on-line and check the balance on your credit card. But even at that, well just this past month when I got one bill I was surprised at how big it was. I went through the items and they were all legitimate, they just ... added up. Don't cry for me, I could afford it. But I had failed to pay attention to what I was spending and I let things get a little out of hand. I'm a pretty responsible person and I don't do that often. I can easily imagine someone paying less attention and getting into serious trouble." From my 2003 Colorado experience here:  Earnest money shows that your offer is legit and is held until escrow as you recall correctly.  I assumed you meant escrow money, because I cannot think of any other non-refundable deposit you'd put on a home.  Perhaps for a new home or a manufactured home?