The email was from a credit card provider and the subject line said “Congratulations!” I opened the email to find out that I was being offered a $3000 credit line increase. The line of credit in question was one we used for our hotel bill on our trip to Austin, Texas as the card gave a significant percentage cash back for travel expenses. We hadn’t used the card literally in years, and I’m guessing that the use of the card prompted the issuer to sweeten the pot for us to continue to use it. I was about to click on the button to accept the offer and increase my credit limit when I paused and really gave some thought to what I was doing.
I was being offered a credit line increase, but what advantage would it really give me?
Disadvantages
False Sense Of Responsibility
I haven’t forgotten that me and credit cards don’t mix. Our use of a credit card to pay for our accommodations in Texas was a rare re-entry into the world of credit card usage. Even though we had the cash to pay for our hotel, using the card was convenient, and it allowed us to earn some cash back on a relatively expensive trip. Being given a higher credit limit obviously means that the credit card company has determined I can use that amount of credit responsibly and could easily pay it back, right? Wrong. Many times the credit limit granted has little to do with your ability to repay that amount.
The More Credit You Have the More You Spend
Credit cards are a slippery slope. My very first card, which I got in college, a credit limit of $360. I maxed it out in a couple of months. During the height of our credit card spending, we would go through a cycle of getting a new credit card, maxing it out, and then applying for a new one. Credit cards are a lot like a fish in an aquarium. The larger the tank, the larger the fish will grow. The more credit you have, the more you will likely spend.
Couldn’t Pay It Back
I already have a healthy credit limit on the account. If I would max out the account, paying it off would have a significant negative affect on my household finances. Increasing my credit limit would give me the ability dig myself into a deep, deep financial hole. Not a good idea.
Advantages
None.
I struggled and struggled to find and advantage to having a higher credit limit (other than being able to satisfy myself through impulsive purchase I cannot afford for a temporary amount of time). When I finally wrote down the word, “None,” the choice was clear. I went back to my email inbox and deleted the email. There was no way I needed a credit limit increase on that account.
EOD Nation, here’s a fun exercise I suggest you give a try. Add up the maximum credit limits on every credit card you have. Now, imagine having every one of those lines of credit maxed out. How would that make you feel? What affect would that have on your monthly finances? How would that much debt affect your long term financial goals?
If having that much debt scares you, ask yourself why you allow yourself to have that kind of potential. Do you trust yourself that much? Do you?
Awesome, as always, Travis!
We are in a similar situation. It’s nice to get the offer, as I think it shows we’ve been making our payments on time, but otherwise pretty useless. I have a credit card I use for traveling, and pay off when I get home.
As far as imagining the credit cards maxxed out, I was there in 2009. My hub and I work for the same company, and all the employees had two week furloughs that year, too. I opened a new card during the holidays, because I didn’t even have gas money to get to the in-laws (2 hours away) for Thanksgiving, let alone buying gifts! We sold an antique car to pay our mortgage one month, and we sold stuff on eBay to pay for our car insurance and plates that year.
It’s good to remember,because it makes you never go back again. Sorry to ramble, your blog always gets me thinking!
I had to go through a furlough as well a few years ago….threw a huge wrench into our finances. HUGE. Thanks for sharing your experiences!