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Your bank has sent a letter saying you’re preapproved for a credit card limit increase. Should you take it, or are you best leaving things as is?

I recently got offered a preapproved credit limit increase. I took it. For me, it’s a no-brainer, but there was a time that I wouldn’t have ever considered it. I’d have kept my credit card where it is. In fact, I’ve turned down the preapproved lines of credit before.

Why would I accept the limit now? Well, I don’t have an ex-husband in the house who spends everything he can, so I don’t need to keep the limits to a manageable level, and I don’t have an issue with budgeting. I benefit from the gains of having that limit increased.

Why didn’t I increase it in the past? My ex was a lot to do with that. But also, when I was young, I didn’t really take credit scores and budgeting seriously. I would have spent all the money and then struggled to pay it back.

Why accept the credit card limit increase offer

There are a few reasons to accept that offer. The first is the “just in case” mentality. I do have a “what if” track of thought. What if my car suddenly breaks down, or what if I need to fly to the UK at the last minute. Anything could happen in life, and I like to know that I have options. I have savings, but I like to know that I also have a credit card that’s there for emergencies.

The main reason I accept the limit increase offer though is for my credit utilization percentage. The higher that limit is, the more room I have for the credit utilization percentage. I often worry if it just reaches 8%. I know I can pay it all back, but I worry about what it does to my score. I try very hard to keep my credit score in the 800s.

I try to keep my credit utilization to between 1% and 5%. The credit limit being higher is going to help with that.

If you have had bad credit in the past and you’re working on improving it, you likely got offered a credit card with a low limit. As you prove that you’re a good spender, the credit card company offers you to increase your limit. This helps to improve your credit utilization percentage, and it helps to boost your score further.

If you are using the credit cards to boost your score, you’ll need other forms of credit too. A small monthly loan will have an initial negative impact but an overall good one.

With a preapproval on an increase, there isn’t a hard check on your credit report. This means there’s little negative effect at first. If you request an increase, there is a short-term effect due to the hard check.

Why not to accept the offer to increase your credit limit

If you’re like my ex, I’d heavily advise you not to increase your limit when it’s offered. The truth is, increasing your limit just opens the door to more spending. He has a very bad habit of seeing that he has money available and uses it. Not on anything that he needs, but on things that he wants. It almost got us into bankruptcy, and I worked hard to get us out of that and made sure the credit limits were not available to him.

My best friend also has a spending problem, although hers isn’t with credit cards. She just spends the money that is available and stays away from debt as much as possible. I’d recommend she boosts her limit but not always by the full amount available to help with her credit score.

If you struggle with the temptation of having the money available, don’t do it. You need to get used to budgeting first.

Increasing your limit could affect your chances of getting a mortgage or a loan. Lenders see what you have available to spend. If it goes against your income, then lenders may not want to loan you as much for a car or a mortgage. So, if you’re planning on that any time soon, you’ll want to reconsider accepting the automatic limit.

Also, you could open yourself up to more fraud. This is extremely stressful. One thing I love about credit cards in Canada is that I can quickly log in and lock my cards if needed. If there is anything suspicious, I can make sure to act fast.

MORE: Why your emergency fund needs to be in a savings account

Did you get a preapproved credit card limit increase offer? Is this something for you? Weigh up the pros and cons.

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