Knowing The Difference Between Upgrading Your Credit Card And Increasing The Limit
by Arnab Dey Loans & Credit 28 March 2023
You know the feeling: It’s time to upgrade your credit card, but you’re not sure whether to increase the limit or go through the hassle of getting a whole new card. Moreover, not all credit cards are created equal, and it’s essential to understand the difference between upgrading your credit card and increasing your credit limit.
Upgrading your credit card involves switching to a higher-tier card with better perks, such as higher cashback and rewards or greater travel benefits; while increasing your credit limit means being able to borrow more money on your existing card.
Knowing the difference is crucial, as upgrading your card could come with higher fees while increasing your credit limit can affect your credit score and potentially lead to debt if not managed carefully. Let us explain it in detail:
Upgrading Your Credit Card
Upgrading your credit card means switching to a higher-tier card with better benefits and rewards.
The benefits of upgrading your credit card can include the following:
- Higher cashback and rewards.
- Bonus points for travel.
- Extended warranty protection.
- Insurance Cover
- Complimentary lounge access at airports.
Upgrading your credit card can also boost your credit score as when you generally upgrade your credit card, you are given a higher credit limit, which thereby decreases your credit utilization ratio, leading to an improved credit score.
To upgrade your credit card,
- you should first check your credit score and ensure it meets the new card’s minimum requirements.
- you may also need to provide additional income and employment information to qualify.
- it’s important to compare the new card’s fees, interest rates, and rewards with your current card to ensure that the benefits outweigh the costs.
Always weigh whether you can manage the higher credit limit responsibly and avoid overspending or accumulating debt.
Increasing Your Credit Limit
Increasing your credit limit means requesting a higher borrowing limit on your existing credit card. The benefits of increasing your credit limit include greater purchasing power, improved credit utilization ratios, and a boost to your credit score. A higher credit limit can also provide more flexibility in managing unexpected expenses or emergencies.
To increase your credit limit,
- you should first check with your credit card issuer to understand their policies and requirements.
- You may need to demonstrate a history of responsible credit usage and a stable income.
- You can also request a credit limit increase online, by phone, or by submitting a written request to your credit card issuer.
Before increasing your credit limit, consider your current debt level, budget, and ability to repay any additional debt. Be cautious about too much debt or overspending, as it can negatively impact your credit score and financial well-being.
Upgrading A Credit Card vs. Increasing Credit Limit- Making The Right Choice
|Upgrading a Credit Card||Increasing Credit Limit|
|Benefits||Higher cashback rewards Bonus points for travel Extended warranty protection Complimentary airport lounge access||Greater purchasing power Improved credit utilisation ratios Potentiality to boost to your credit score|
|Key Differences||Can come with higher fees and interest rates||May not come with additional fees or changes to interest rates|
|Examples of Situations||If you frequently travel and want access to airport lounges, upgrading your credit card to a travel rewards card may be beneficial.||If you have a sudden increase in expenses, such as home repairs or medical bills, increasing your credit limit may provide the necessary funds to manage the expenses.|
|Which Option to Choose?||If you’re looking for better benefits and rewards, upgrading your credit card may be a better option.||If you’re looking for more purchasing power and improved credit utilization, increasing your credit limit may be a better option.|
Understanding the differences between upgrading your credit card and increasing your credit limit is important for managing your finances and creating a sense of financial security. Actively managing your credit cards is an important part of financial health, so understanding these differences will set you up for success in the long run. Planning and budgeting are critical to responsible credit card usage. Apply Now!