When it comes time to select a credit card, one of the factors that people often overlook is the amount of credit that will be extended to them on the card. This is sometimes difficult to determine when applying for a credit card because the actual amount awarded by the credit card company can vary significantly based on the applicant’s income and credit history. Nevertheless, it is an important thing to take into consideration when choosing a card before submitting your credit card application – it just might be pointless if it’s not going to give you the credit limit that you’ll need.
The first thing that you need to do is to ask yourself what type of credit limit you really need. In order to determine this, you need to assess what the purpose is of the credit card. Here are some common examples of what someone might learn when asking themselves this question:
- The amount must be enough to consolidate other debt. Many people are interested in using a new credit card to balance transfer the amount of outstanding debt to the new card. In this case, you need a credit card with an amount that is greater than the amount of debt that you wish to consolidate. If you aren’t going to be able to qualify for a credit card with this amount, it may just be trouble for you to get another new credit card with a low credit limit because then your debt still won’t be consolidated and you’ll have another new credit card to add debt to.
- The amount must be low enough to be manageable. People who are getting a first credit card or a poor credit credit card will want to seek out credit cards that have low credit limits which will reduce the likelihood that they will get themselves into serious debt. In most cases, these will be the only credit limits available to those borrowers but the borrower should still take some responsibility for identifying a reasonable amount of debt that can be paid off each month and making sure not to spend more on a card than this amount regardless of what the actual amount of credit limit is that has been awarded on the card.
- The credit card limit must be reasonable considering the fees that go along with the credit card. For example, some people with bad credit are offered credit cards with low limits, such as $500 but they have an initial annual fee that is a high percentage of this (such as $250). This makes it pointless to get the credit card because the credit limit doesn’t offer you room to really borrow any money on the card.
- The credit card should have a limit. There are odd offers out there like the no limit credit card. In some cases, these are scams. In other cases, these are legitimate cards but they can have a negative impact on your credit score because they get reported as being “maxed out” when they are not. Make sure to get a card that does have a credit limit.
What is most important is that you are aware that you should take the credit limit for a card into consideration. By knowing what you need, you can always find a better card than you would if you went into the situation blindly and just accepted what was offered to you.
Related Posts:
- Think Before Using a No-Limit Card - You may think you have reached the top echelon of credit card users when you apply for and receive a credit card...
- Choosing from 529 Plan Credit Cards - If you’ve ever looked into the different types of credit cards before, you know that there are a ton of different programs...
- Don’t Treat Your Card Limit Like It’s Income - Living beyond our means is one of the chief reasons many in society is finding themselves in deep debt. This is also...
- Capital One’s Small Credit Limit Trap - The November 6, 2006 issue of Business Week magazine features an article about Capital One Financial’s credit card and sub-prime lending practices....