Reduce Your Credit Limits to Manage Your Spending
How much credit do you have? By this, I mean how much available credit could you go out and spend today if you really wanted to max all your credit cards to the hilt?
I’m actually surprised by the gradual increase in my credit limits, and by just how high some of them have gone. I try to spend no more than a few hundred on my credit cards at any time, and always make it a habit to wipe out my balances on a monthly basis. Still, my credit limits are maintained at around $6,000 per card. So what's the concern? Well, with terms improving for many top credit card rewards programs, it's not surprising how tempting it has become to start piling on the credit...or worse, the debt.
All this makes me reflect on the importance of being comfortable with the amount of credit I have. Now if you have credit cards yourself, take a look at them now and review the credit limits you have on them. If you have more than one card in your possession, you could very well find that you have credit lines worth five figures at your disposal. And if you are tempted to spend more than you can afford, then you could end up accumulating credit card debt over time and struggling with financial problems.
One simple way to avoid debt is to remove the temptation. You don't need to cut up and cancel all your credit cards. But you can ask your credit card issuers to lower your credit limits.
A lot of card companies bump up the credit limit on your card without even asking whether you want this to happen. To my chagrin, I’ve had this happen on several occasions. But if you've got any issues with this, you can always just call your credit card company to discuss the possibility of lowering your credit limit.
This is one thing that a lot of people fail to remember when using their credit cards — that they can easily run into debt problems by allowing themselves to accept higher credit limits. Without imposing some set boundaries on our spending, it becomes way too easy for spending to lead to bigger balances over time. Credit card companies are very much aware of how human psychology plays into our spending behavior. As it is, we don’t all have the same levels of discipline to keep our spending patterns in check, so it's wise to implement debt and credit management strategies that enforce actual limits to the things we do.
If you're facing higher credit limits, take the responsible approach and call up your credit card company and ask them to lower it to a limit that fits your budgeting and spending plans. If you know you'll only need $1,000 as a credit cushion instead of $6,000, then ask for it. You’re the customer and if they won’t address your concerns, then you can threaten to go elsewhere. In fact, it's something I'd probably just go ahead and do if I find that my card issuer shows that much disregard for their customers' requests. And when all is said and done, I feel better knowing that I'm taking steps to keep my credit use under control.
More Ways to Keep Credit Use Under Control
So what are some more steps that you can take to get a handle on your debt and to avoid falling into a tough financial bind? Remember that it's easier to manage issues like this before they spin out of your control:
- If you've got debt, stop using your cards or applying for additional credit until you're comfortable with your situation.
- Stop spending and go on a budget. If need be, use budgeting software to give yourself some spending limits. Simply learn how to say NO to yourself.
- Check your credit situation by reviewing your credit scores and reports on a regular basis. Check AnnualCreditReport.com for free credit reports every year, and credit score products like myFICO, which can help monitor your credit information for a fee.
Most of us have made some credit-related mistakes at one time or another. You may already have run into problems with paying back what you owe. While there is a lot of credit advice out there that can help you if you are in this situation now, it's probably best if you first gauge and assess how your finances currently stand before you do anything else.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.