Industry insiders and credit card whizzes publish the following consumer credit advice for some time:
Apply for only as much credit as you need.
Yet, legions of other credit card users choose a different, and more aggressive approach.
Apply for as much credit as you can get.
This alternative strategy is based upon the belief that credit card users can opportunistically reap all sorts of benefits; maybe even generate a profit, by snubbing conventional wisdom. Ultimately, this tactic attempts to acquire credit cards with sky-high limits – limits that far exceed their personal financial needs. This is, at best, a risky practice that should be avoided (at least at first) by new credit cardholders or those trying to reestablish a good credit score after overcoming the consequences of credit mishaps and missteps.
High limit credit cards are typically given to businesses and consumers with excellent credit profiles. Think of High Limit Credit Cards as the grand prize for using credit judiciously.
A reward credit card with an elevated credit limit offers cardholders amazing interest rates, airlines miles and even a cash reward.
(Scroll down to continue reading or take a look at the high limit credit card offers below).
Would the benefits offered by high limit credit cards enhance your financial bottom-line?
If so, ask yourself:
- Do you proactively take care of your credit card debt and work at maintaining an excellent credit profile?
- Are you a vigilant money manager who understands the importance of spending limits?
These elite High Limit Credit Cards provide lines of credit for personal and business purposes that:
- Have no annual fee
- Offer low to zero interest rates and/or APRs during an introductory period
- Save money on the purchases made
- Cash back rewards
- Waive the balance transfer fee
If you have proactively managed your credit profile – that demonstrates excellent cash management skills, take advantage of your strong FICO score. First, though, let us begin with the definition of a few important credit concepts:
The TOTAL CREDIT LIMIT – the sum total of each and every credit limit for each credit card reported on your credit profile, including unsecured and secure credit cards.
The CREDIT LIMIT – is the upper spending limit you are able to spend on any one credit card owned.
The OVER THE LIMIT FEES – are optional fees that credit card companies can charge should a cardholder charge beyond their credit limit maximum.
The CREDIT UTILIZATION RATIO – is a ratio that arithmetically compares your outstanding balance on one or more credit cards, against their respective credit limits. This ratio is a fundamental part of credit scoring algorithms used throughout the finance industry.
Here’s an example, if the balance on your primary credit card is $2,000, and that specific credit card has a $4,000 limit, the utilization rate would be 50% ($2000/$4000). A 50 percent credit utilization ratio is likely to be problematic because it directly conflicts with advice offered by credit professionals:
- A credit card utilization ratio should not exceed 50 percent for any one card
- Your overall credit utilization rate should not exceed 35 percent of your entire available credit. However, the 35-percent rule only serves as a guide. It is really best to maintain the lowest balance possible at all times.
One solution: A credit cardholder can opt to ask for a credit limit increase because, when implemented correctly, this savvy financial move typically results in lower utilization rates, better credit scores, and, as logic would dictate, more advantageous credit offerings.
The Rewards Offered by High Limit Credit Cards
Countless rewards await those with good credit.
- Attractive Balance transfer opportunities
- A one-time bonus for opening, and responsibly managing an unsecured credit card
- Potential rewards that are unlimited
- Rewards that never expire as long as the account remains open
- An intro APR
- Simpler spending techniques: Large purchases are charged on one credit card, rather than the need to use several cards to pay for the same purchase.
Determining Credit Line Limits
There are industry-tested standards and bank-specific benchmarks that help define each cardholder’s maximum credit limit. The reality is that an offer of a lower line of credit is really code for: The bank has some concerns regarding the cardholder’s money management skills.
However, there is good news – Credit line limits are not written in stone. Limits can be revised after the cardholder has the chance to demonstrate an ability to maintain an acceptable credit history and debt-to-income ratios.
Recently, though, credit card issuers have begun to grasp that they too, need to make smarter everyday credit decisions to improve their profit margins. As such, they have started to implement a routinized assessment of every credit cardholder’s account. These internal analyses are usually triggered by a scheduled system check, or a late payment. If the credit card company finds troubling statistics (i.e. bad credit information) regarding your credit, they always have the option of reducing the credit line to mitigate their risks.
A higher limit credit card may, by its very nature, improve your credit score in the event of. That is, if you are capable of resisting a powerful temptation to overspend. Adding a card with a high limit, like the Visa BankAmericard, increases one’s total credit available, and this, (It may also help you recover points lost from the hard inquiry that was generated when you applied for the card.)
So, How to Get Approved for High Limit Credit Cards?
First, note that there are no guarantees of approval for anyone applying for high limit credit cards. As a general rule though, applicants with good credit or excellent credit profiles are more likely to be approved. However, other benchmarks (like verifiable income, or job stability) are used in the credit card approval process.
Ironically, the concept of just what defines ‘high limit credit cards’ is not a static concept, but one of relativity. In other words, everyone has his or her own perception of what constitutes high limit credit cards. For our purposes, high limit credit cards are considered to be credit cards with credit limits that significantly increase one’s total available credit. As such, an increase of a credit line of $1,000 or a credit line of $75,000, could be both considered ‘high limits,’ – because the ‘high limit definition is completely dependent upon the cardholder’s existing financial situation.
Effectual business owners researching these types of lines of credit take advantage of external business financing and educational resources, like Business Financing Hub (BFH), to gather information regarding their current and future financing needs.
Some Sage Advice
Charging on a credit card to its maximum limit can seriously injure a FICO credit score. If you choose to spend freely and imprudently with your new high limit credit cards, you could witness (according to the algorithm that calculates your FICO Score) your credit score drop by as many as 45 points. In scoring models, your length of credit history is reflected in 15 percent of the total score. The existence of new credit card information represents 10 percent of your score.
This doesn’t mean to suggest that when you receive high limit credit cards you should not use them, except to collect dust. If the new card’s benefits are too good to let pass by, pay off other credit card balances before you start to charge on the brand new card. Remember, some high limit credit cards offer a rewards sign-up bonus that requires the cardholder to charge a predetermined minimum amount of purchases within the first few months.
It’s also possible to increase your available credit without ever applying for any new cards. Simply contact the credit card issuer and request a credit limit increase. This becomes even easier when you have:
- Been a cardholder for a substantial amount of time
- A low balance
- A strong history of on-time payments
Upon request, a credit card issuer will typically run a credit check to determine if your overall credit history qualifies you for the requested credit limit increase. Note, however, that this lender inquiry will likely result in a ‘hard inquiry’, which usually reduces the credit score. As you begin your conversation with the credit card representative, check with them if there will be a hard inquiry added to credit report.
High limit credit cards are used effectively to improve credit scores. But, stay ever vigilant because when you carry a balance that is nearing your credit limit, you begin to play a dangerous game because you can easily miss a payment or be tempted to overspend. Certain credit scoring models, like the Luhn Algorithm analyze someone’s total credit available as a reliable predictor of potential future debt.
If you are confident that adding more credit will not adversely impact your existing spending patterns, a high-limit card is definitely worth considering. Higher credit limits may raise your credit score (by lowering utilization rates) resulting in lower interest rates.
Industry professionals deliberately created the Business Financing Hub specifically for small business owners and entrepreneurs. It is an extensive and comprehensive website dedicated to entrepreneurs and small business owners seeking financial information to make prudent financial decisions. The Business Financing Hub offers financing solutions and publishes insightful articles about topical finance issues.
The Business Financing Hub specializes in evaluating financial situations and creating ingenious finance solutions through a variety of products, tools and services. The Business Financing Hub is an online platform dedicated to small business owners in need of business financing.