What is a credit limit: A credit limit is incredibly critical to virtually every individual. Practically speaking, a credit limit for your credit card is the max balance you are allowed to have on your credit card, usually given by a financial institution or lender.
A normal credit limit depends on you and how much you are able to spend in a month to keep your credit score strong. Your credit card company generally won’t give you a high limit until they are convinced you are a stable individual. Which in theory, is good. It’s good because it keeps you free from the hassle of dealing with missed payments or high interest rates for going over as well as other serious consequences.
The limits on your card are there to warn you and keep your spending below the set number, for when you need to make a purchase or move into a home you can show a wholesome number on your credit score.
Managing your credit limit is critical. It may seem like at the time you have money and are able to succumb to tempting purchases. Going over on your card will not only mean that you have to pay it back but a few credit bureaus may ask for interest.
Setting your limit on Wallet ensures serenity of mind and purchases when, by chance you are unaware of your purchasing history – Wallet is there to remind you through notifications on your mobile to slow down, take a break from spending, and have a look at your budget with us always by your side. Set you limit on your Wallet application easily, by recording it on the mobile app.
While it may sound better to have a high limit to avoid going over with, it isn’t always good to have. It is mainly because you may increase your utilization ratio with your credit bureau. Your ratio is calculated by the amount of spending you make on your credit, if you have a 500$ limit on your card but you’re only spending 50$, your ratio is 10%. But if your limit were 300$, and you spend 50$ then the percentage would be higher, giving you a qualified credit score.
It depends on how much you will spend, how much you can pay, and how you decide to keep track of your credit. If you do decide to increase your limit, make sure you are using your credit wisely by spending only what you know you can pay back. Not all credit bureaus will offer a higher limit because they are aware of the volatility. Some will require you to remain a stable credit holder for a period of time before willingly increasing the limit.
The worst thing that can happen, is you miss a payment. Just one missed payment and your score can drop, and you can be charged an interest rate for paying it back. It’s important to keep all of these factors in mind, even if it may sound overwhelming at first – it is possible to live a healthy and fruitful life.
Wallet wants to help you, we want to make sure you don’t miss a payment or go over your limit. We are here for you, to help you in preparing for your long and fruitful life.
Written by Brittney Pilarcik.