Credit cards can give you a lot of flexibility when it comes to your finances. When you get a credit card, you have the freedom to make purchases even when you don’t have any cash on hand. As long as you always spend within your means and make payments on time, your credit accounts can help build a well rounded credit history and reflect positively on your overall financial health.
Most consumers know that every credit account has a spending limit. If you exceed this limit, purchases may be declined. This doesn’t mean that you want to spend just up to your limit every month. If you consistently max out your credit cards, or come close to doing so, it will negatively affect your credit and lenders will see you as a high risk borrower. As well, if balances are not paid off at the end of the month, interest is charged on the remaining balance, plus all new charges.
How much credit do I have?
The easiest way to see your credit limit is to log in to your online account or check the monthly statements that you receive in the mail. You should see the available credit on the account clearly listed.
How much credit should I use?
Keep your credit utilization ratio low to continue making the most of your credit accounts. Ideally, you don’t want to spend more than 30% of your available credit. This means that if your account has a $1,000 credit limit, you should avoid spending more than $300 each month.
If your available credit is fairly low and you’re having a difficult time keeping your spending below 30%, consider making multiple payments per month to keep your balance down. Credit companies typically report balances to the bureaus at the end of the month. When it’s reported, you want your usage to be above 0%, but below 30%. This shows that you’re a responsible borrower.
Can I increase the amount of credit that I have?
If you regularly use more than 30% of your available credit, it might be a good idea to see if the creditor is willing to increase your limit. The creditor will probably need to perform a hard inquiry to assess your creditworthiness. Hard inquiries temporarily have a negative effect on your credit.
Creditors are often willing to increase your limit if you make payments on time and in full each month, or if you’ve had an increase in income.
You could also consider opening another credit card. Each individual account has its own set limit, so opening a new account will give you an additional 30% of the new account’s limit. Keep in mind that opening another account also requires a hard inquiry on behalf of the creditor. For this reason, it’s best to choose between opening a new account or requesting that an existing creditor increase your limit. This way, you avoid two hard inquiries.
Contact from Debt Collectors? Seek help from a Consumer Protection Law Firm
Once you begin to default on credit card payments, the creditor may choose to send your account to a debt collector. The Fair Debt Collection Practices Act is a federal law that protects consumers from an abusive collector’s tactics.
Flitter Milz is a nationally recognized consumer protection law firm that pursues matters against collection agencies and collection law firms. Contact Us for a free evaluation of contact that collectors have made with you.