A credit line increase is a terrific tool to improve your financial standing and experience life in HD.
But there are rules.
Not the kind of rules that will force you to walk across burning coals or recite the constitution.
Rules that will allow you to apply for limit increases at the best possible time for the best possible rewards. These are NOT the typical “don’t do this” annoying checklist rules that feel unattainable and nonsensical.
These are the types of rules that will allow you to make your move at your convenience, for your gain.
Rules that rule. Too much?
Rule 1: Timing that doesn’t suck
Remember watching survival shows back in the early 2000s? What was the cardinal rule for a warm, toasty shelter? Don’t start building when it’s already raining.
The same principle can be applied to finance. You might be able to negotiate an increase, but it’s not going to be on your terms.
There are a few things you want in place before you make that call to your credit card company:
Your credit utilization is under 30%
That your credit rating is hot (check your credit report!)
Your bank account is healthy and there is no derogatory information on it
Income payments take place regularly
The most important thing is that your credit line is maintained, but used. This means that you make regular purchases with your card. You make your payments on time and your payment history is clear. And, you settle your credit card balance every month.
Rule 2: The increase works for you
Sure it’s great to have a $100,000 credit line. It’s also great to manage your payments without breaking into a hot sweat every time the bill payment pings on your phone.
Your credit line should enable you to have access to the best in life. At the same time, it should add value, automate your finances (learn more in Ramit’s book, I will teach you to be rich), and afford you access to some epic rewards.
Rule 3: You’re in control
Now, this rule is the one that is often ignored and tends to make us feel vulnerable to the core. If you’re still living a trapped (Ramit refers to this as the ordinary work-yourself-to-a-standstill to barely afford a cup of coffee) or in treadmill life (where maybe one day you’ll get to travel), it’s time to gear up a notch and realize that banks exist because we let them.
They provide a convenience, and once that convenience no longer exists, we will quite literally take our money elsewhere.
Thinking of calling BS on this? Just consider this.
They need our capital in savings to create a buffer for lending. They need to provide loans in order to make money on the interest charged. Get it? They need your savings and your credit. Yes, even Bank of America has advertising campaigns targeted at new clients.
Now that you understand your buying power, to request a credit limit increase should articulate your request confidently. Our negotiation techniques are hardwired for a positive outcome and can be applied from credit limit increase requests to asking for a raise. Without sounding cheap.
Now for the “how”
While it’s simple enough to do an online limit increase through your online profile with the chosen card company, some companies prefer to do the final verification telephonically.
When the call comes through (and expect that call to come through), it’s important to remember Ramit’s cardinal rules of negotiation.
A special tip from Ramit: Always take notes of the call and get as much information as possible. This includes names, dates, numbers.
Step 1: Ask for what you want
Simply ask. Something as simple as “I’d like a limit increase on my credit card” is a good place to start. But if you want to take it a step further, add in “and I’d like to see about a reduction in that APR.”
Step 2: Possible pushback
If there is a slight pushback on either, remind the consultant that you’ve been a customer for X years. In Ramit’s negotiation techniques, he explains that it’s far more cost-effective for a bank to retain a customer than to onboard a new one. In fact, the cost to onboard new customers is between $350 and $2,500.
Step 3: Another nudge if needed
If there is still pushback or the limit is not what you desire, you need to gear up. Ask the consultant to view your history. Ask again how the consultant can help you. Repeat this process with a supervisor if you’re referred to them. Remember to end strong and use phrases like, “I understand,” “I want,” and “I’d like.”
If you’ve remained firm, you should have what you want by the end of the call.
Why you should absolutely ask for a credit line increase
As Ramit says, “Credit has a far greater impact on your finances than saving a few dollars a day on a cup of coffee.” But it might not be entirely what you think (if what you were thinking was going on a shopping spree and using your limit more like a target).
Well managed credit boosts your credit score
If you find that you’re pushing beyond that 30% usage of your credit card, it might be a good idea to increase your credit card limit. This means that you remain within that 30% margin, which helps push up your credit score. Request a credit line that will allow you to comfortably remain within a safe margin. Failing to do so might cause you to use a higher percentage of your credit card, which can lead to a drop in your credit score. And it’s a downward spiral from here, my friend. If you want to know more, check out our article on how to check your credit score.
Higher scores translate to better deals
If you have a perfect, can’t-touch-this credit score as the goal of your credit card line increase, then you’re in for a treat. Better credit scores mean better access to exclusive credit card offers. Think platinum, invite-only, reserve, elite. Need we say more? Plus, if your credit card issuers work on a variable APR, your credit score will count in your favor for a lower APR. Not just for your credit card, but other credit products too.
Your cash flow is in your hands
A credit card is a very short-term bridge between the purchase of an item and when your income comes in. Higher credit limits will provide you with that extra cash flow, as long as you remember not to use it like a safety net (that’s what emergency savings are for).
When you should say NO
A credit limit needs to serve you. The moment a higher limit causes nervous night sweats and clammy palms, it’s time to pull the plug.
You’re investing. Don’t use loans to fund investments
The credit line increase is unaffordable
You are at the peak of credit score heaven
Another credit company is about to get your business
You’ve recently applied for credit
A credit line increase is about more than pushing the boundaries of credit limits. It’s about implementing a strategy that will allow you to tap into the full potential of having a credit card. A credit card should:
Be a tool to improve your credit score
Help you reach your personal finance goals
Create opportunities through buying power
Once a credit card line increase ticks all these boxes, you know you’re well on your way to forging a financial plan that suits your lifestyle.
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