Should I get a new credit card or increase my credit limit?
If you’re thinking about getting a new credit card or requesting a limit increase on an existing one, there could be a few reasons why. Maybe you’re using your card more often, for example. Or maybe you’ve gotten a raise and your buying power’s increased.
A new credit card could add some flexibility to your day-to-day spending. But so could a higher credit limit. Learn more to decide which option might be right for you.
What you’ll learn:
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To increase your total available credit, you could try applying for a new credit card or asking for a credit limit increase.
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What’s right for you depends on your personal circumstances.
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When deciding how to access more credit, you may want to consider the impact on your credit scores and overall financial picture.
3 reasons to consider a new credit card
One way to access more credit is to apply for a new credit card. The application process for a new credit card may be similar to the one you followed for your existing card. Card issuers may look at things like your credit reports, credit scores and income to determine whether you’re a good candidate.
If you’re approved for a new card, it could:
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Offer valuable rewards. If your existing credit card doesn’t give you the opportunity to earn rewards, you could consider a new card that does. For instance, if you’re planning a trip, you could earn rewards miles to help cover your travel costs. Cash back rewards, on the other hand, could add up over time if you use the card for everyday purchases like gas and groceries.
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Come with better terms. Your new credit card could come with a lower interest rate or an introductory APR. This could be helpful, especially if you’re planning a large purchase or consolidating debt.
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Keep your credit utilization low. Getting a new card can lower your credit utilization ratio. That’s the percentage of available credit you’re using across your credit cards and other lines of credit. The Consumer Financial Protection Bureau (CFPB) recommends keeping your ratio below 30%.
3 reasons to consider a credit limit increase
Requesting a credit limit increase on an existing credit card is another way to access more credit. As part of the approval process, your card issuer will review your credit history and consider how much additional credit you’re asking for. They may also look at information like how long you’ve had the card and any previous credit limit increase requests you’ve made. They might consider updates to your income or employment status as well.
Here are some potential benefits of getting a credit limit increase:
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It could lower your credit utilization ratio. Like getting a new credit card, increasing your available credit can help lower your credit utilization ratio. That’s a good thing for your credit scores if you’re not increasing your spending at the same time.
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It won’t affect the age of your credit history. Opening a new credit card account can lower the average age of your open accounts. That has the potential to negatively impact your credit scores. But a credit limit increase won’t change the length of your credit history.
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It could simplify your payments. A credit limit increase on an existing card means you won’t have to keep track of yet another account. This could make it easier to pay bills and track your spending.
3 things to do before getting a new card or increasing your credit limit
When you’re debating these two options, it could help to do the following:
1. Think about the potential impact on your credit scores
Both options have the potential to affect your credit. That’s because an application for a new card will trigger a hard credit inquiry. And too many hard inquiries in a short period of time may have a negative impact on your credit scores.
Some lenders also conduct a hard inquiry for a credit limit increase, but Capital One doesn’t.
2. Be mindful of the opportunity to overspend
Either option will typically give you more available credit, which could make it tempting to spend more. But keep in mind that doing so could make it harder to pay off your credit card debt. And carrying a balance on one or more cards could increase your credit utilization ratio and lead to higher interest costs.
3. Factor in your ongoing need for more credit
Is your need for additional funds ongoing? Or is it temporary or occasional? If it’s the latter, it may help to know that Capital One never charges cardholders over-limit fees. View important rates and disclosures.
And if your account has access, you can sign in online to check whether an over-limit purchase may be approved. Capital One cardholders can also change their over-limit preferences to disable the ability to spend over their credit limit.
New credit card vs. credit limit increase FAQ
Check out these frequently asked questions about getting a new credit card versus requesting a credit limit increase.
How often should I apply for a new credit card?
A single hard inquiry from one credit card issuer generally has a small impact on your credit scores. But multiple inquiries in a short period of time might have a more significant effect, according to the CFPB. That could signal to lenders that your financial situation has worsened.
When should I ask for a credit limit increase?
You might be able to ask your card issuer for a credit limit increase whenever you want. Keep in mind that doesn’t necessarily mean you’ll get approved.
In other cases, a creditor may come to you with an offer to raise your limit.
To learn more about Capital One policies, check out these additional frequently asked questions about credit limit increases.
Is there a downside to increasing my credit limit?
Whenever there’s an increase in spending power, there may be a temptation to overspend. If that results in missing payments or carrying a credit card balance, it could hurt your credit. That’s why the CFPB recommends paying off your balance in full whenever possible and applying only for the credit you need.
Capital One doesn’t conduct a hard inquiry when processing a request to increase a credit limit, but some lenders do. If that’s the case, you may experience a temporary dip in your credit scores.
Key takeaways: New credit card vs. credit limit increase
Applying for a new credit card or requesting additional credit on an existing card are two ways you might increase your spending power. But it’s important to think about how your decision might affect your credit scores and overall finances.
If you decide a new card is the right move, Capital One has a rewards card to fit your lifestyle.
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See if you’re pre-approved for credit cards without harming your credit scores.
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Explore travel rewards cards with unlimited miles you can actually use.
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Earn unlimited 1.5% cash back on every purchase, every day, with a cash back rewards card.
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Earn unlimited cash back on food and fun with a dining and entertainment rewards card.
