1. It improves your credit score.

A large portion of your credit score relates to the amount of revolving debt you have versus the limit you have available. I recently called my credit card company and asked for a credit limit after discovering all of these benefits to increasing the limit on my card. Increasing the limit on your credit cards while not increasing the balances gives your score a boost. 

When you have a lower credit utilization ratio, (how much credit you have in relation to the amount of debt you have) this reflects positively on you with the credit bureaus. Getting a bigger limit, while keeping your debt at the same level, improves this ratio. If you are thinking about raising your credit limit you need to be smart about keeping your debt at the same level instead of thinking you can increase this as well.

The balance on any credit card should not exceed 30% of the credit availability. So, if you’re credit card limit is $10,000, your balance should be kept below $3,000.

2. Making a big purchase.

Another reason that you may want to increase your limit is that it increases your purchasing power. Your credit limit is the amount of money that you can spend on your credit card. You may be faced with a time when you need need to make a big purchase, you may need to increase your credit limit before this is possible. 

3. It serves as a temporary emergency fund.
To be financially stable means having an emergency fund that would cover three to six months’ worth of household expenses if an unexpected emergency of income were to happen. It is an expensive method of financing emergencies but is far better than having no options at all. 

4. It can be an inexpensive way to utilize your home’s equity.
If you have equity in your house, you may be able to apply for a secured credit card. This type of card is especially useful if you are undertaking house renovations. Rather than spending potentially hundreds of dollars on refinancing fees to re-mortgage your home or take out a second mortgage, you can use the secured card for renovation expenses. 

 If you raise your debt balances up to match your new limit, the benefits of the increase disappear. Managing your credit card debt wisely will pay off in both your credit report and in your financial planning goals.