Need advice about credit limit increases

Hi, I got an offer from Capital One today to increase my credit limit on my card from $4000 to $6500. I was just going to accept it because I've always heard that you shouldn't refuse an increase. It looks good to be trusted with a higher credit limit and it will lower your overall utilization. 

I'm wondering, is that true? And even if it is true, is it a good rule to live by? I want to get a bank credit card next year because Capital One leaked my SIN so I don't like them anymore. Also it's more convenient to have one with my bank. But I wasn't going to cancel my card with Capitol One when I get my bank credit card because it's the oldest credit I have. It would be worse for me to cancel it, I think. 

Anyway, the point is that I don't want an increase on my Capital one card to impact my ability to get a bank credit card next year. And  also I don't even know why I would want that kind of credit limit on a credit card. I'm terrified of maxing it out again and having to pay it off at 19% interest. 馃拃

Any advice on this would be great. Pls and thank you 馃檹馃徏

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  • Take the increase. Increases which are offered don't come with a corresponding hard pull, which is the thing that dings your credit. 

    Many YNABers have credit card limits which match or exceed our entire annual incomes. How lenders view you is complicated, but a $2500 increase offered to you by the issuing bank is not going to make you look like a substantially bigger risk. It's not until you get into the range where you look like you could really charge way more than you could ever pay back that they get nervous, and even then, if you show no history of ever having done that, they mostly don't care.

    If you're worried about maxing it out, get better YNAB habits. You should be paying the statement balance every month because you are spending within your budget and covering overspending before it happens. 

    Two other points:

    1. Hackers target banks because that's where the information is. I wouldn't quit using a bank just because of one security breach unless it resulted in disaster for you and many other customers. You're going to be switching banks every couple years if you do that. Monitor your credit for unauthorized activity and maybe get an identity theft rider on your insurance; they're pretty cheap.

    2. Bank credit cards don't usually offer you any rewards. There's no reason to have a card with your bank unless it's the only card you can have. By all means, if it makes you feel more comfortable to make your daily driver your bank credit card, there's nothing wrong with that, but it's not likely to be a card which benefits you in any other way. 

    Like 7
    • WordTenor I don't know that your point #2 is correct. Both of the bank credit cards I use offer rewards; one has a points system and one has a cash back system.  To your point, though, it's worth it to make sure one is not losing useful rewards opportunities by switching cards.

      I'm pretty sure the bank credit card I don't use also has some sort of reward program. I don't know because I don't use it, except for once every so many years when they tell me they'll close the account if I don't. 

      Like 3
      • WordTenor
      • Can we agree that goals are dumb and immature? Sure.
      • WordTenor
      • 1 mth ago
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      Fuzzball Meows That's why the "usually" is there. It's not always true, but cards offered by your brick-and-mortar are often inferior to other cards when it comes to rewards. Though of course, your brick and mortar could very well be one of the issuers of the major rewards cards, of course! When you're in the realm of choosing cards (or any account), you want to choose them because they are useful in some way. Presumably, as a good YNABer, you won't need to look at the interest rate as you'll use YNAB to keep the carried debt at $0. 

      Like 3
    • WordTenor thanks for the advice! I feel a lot better about accepting the increase now. I think sometimes I forget that my credit limits are peanuts compared to most other people. 馃槄

      I have only been using ynab for 6ish months now but I finally got 1 month ahead on my budget. Literally 6 months ago my credit was maxed and had been for years. Now I've paid about half the balance and am going to have it paid off by November 2021. The only reason I've gotten this far is that I've committed to paying any credit card spending in the same month on top of my $350 monthly payment. That way I'm always getting ahead while allowing myself to use credit if I need to. So I guess I'm in the process of working on my habits. And because of that I'm absolutely terrified I will make the same mistakes I previously have. I guess I just have to make sure I don't. 馃し馃徎鈥嶁檧锔 I don't know what I'm even going to do with a credit card once I've paid this off. Besides paying for parking I'm very apprehensive about charging anything to it. 

       

      Fuzzball Meows  Yeah that's another reason why I want a bank credit card. The rewards are a lot better and there more options to have lower interest rates. But maybe WordTenor lives somewhere that doesn't offer rewards from bank credit cards? I live in Canada and the impression I've had is that a bank credit card is desirable and places like Capital One and the like are where you go when you can't get a card at the bank. Which happened to me because I was irresponsible . Lol 

      Like 2
    • Space Cadet I used to use the limit on my first credit card (which I was only able to get because I had an account at the bank - getting a 17 or just turned 18 year old a credit card was apparently complicated when I was that age) as the limit on my spending. I completely flipped the first time they increased my limit, because I didn't get a notification when they did it (or had ignored it) and my bill was much more than I was expecting.

      Once I stopped using the credit max as the thing that told me when to stop spending money, paying down the balance and not maxing it out got much easier. For me, it was about changing my limiter. It sounds like that (using YNAB as your limiter, instead of maxing out the cards) may be something that works for you, and continuing to use YNAB as the limiter on your spending should help keep you from ending up with a maxed out credit card as a limiter on your spending.

      Congratulations on getting 1 month ahead and paying off half your card! Keep up the good work!

      Like 3
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 1 mth ago
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      Space Cadet 

      I'm in Canada too and as Fuzzball Meows points out, Canadians just don't have the credit card options that the Americans have, plus we don't have many options in bricks-and-mortar banks either.

      I will tell you that I care not a fig for how anything I do affects my credit score. If I want to change bank accounts, I do. If I want to close a cc account because I don't use it anymore, I do. There might be a temporary dip in the score when I close an account -- I don't know, don't care, and don't watch it -- but I did double check my credit report for any suspicious activity this month and noticed my score has never been higher.

      If/when you are looking to get a new/different cc, check out https://www.ratehub.ca/ It's a site that corrals all the financial rates for services from all sources Canadian in one place so you can make comparisons.

      Like 4
    • HappyDance I'm actually a USian and don't know how Canadian cards work. :)

      I just know that back when I was a teen, USian teens couldn't get a credit card from a non-brick-and-mortar bank, and couldn't get a card if they didn't have an account at that bank. It could be totally different in the US now; I don't know.

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      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 1 mth ago
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      Fuzzball Meows 

      Ah. My mistake. It would seem that US teens and Canadians of all ages have the same limited choices. 馃檪

      Like 1
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 mth ago
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      Fuzzball Meows I don鈥檛 know. Maybe it鈥檚 changed but when I was going to college many moons ago they had major credit card companies sitting in the middle of campus pushing their wares. That鈥檚 how I ended up with my first credit card, a Discover card and proceeded to stupidly buy things I couldn鈥檛 afford while going into debt. I wish I could have talked to my younger self and didn鈥檛 have to learn responsible credit card usage the hard way!

      Like 2
    • Superbone I'm not sure if that makes you younger or older than me! 

      My sister, who is only three years older than me, was able to get a credit card much earlier than I was, and I think she didn't even have to have my parents cosign or something. My parents wanted both of us to have experience managing a credit card while still in their house so they could teach us good habits, which apparently worked for my sister and didn't work for me. Possibly because I was entering college far away from home a few months after getting mine, vs. the couple years my sister had under their tutelage.

      Like 2
    • Superbone Yep, that's how they roped me in too.  Finally a few years ago paid all the credit cards off and am now chasing points (though sadly not much travel).  Assuming you pay everything off each month, it  is a great deal normally, though one has to be careful.  Last step, the student loans. 

      I'm sure it's different in different countries but another aspect to think about is fraud protection.  Credit card holders in the US are only liable normally for the first $50 of a fraudulent transaction.  You are at the mercy of your bank if using a debit card.

      Like 3
    • Space Cadet CONGRATS on your progress! That's HUGE!!

      Honestly, I charge EVERYTHING to the credit card for the rewards alone. Anything and everything that can be charged to the card I do. It's "free" money IF you know how to be responsible with the card. Once I was solid with my habits of working from my budget, then using the card was a complete non-issue for me. What is the difference at that point between using a debit card vs a credit card? That's really just tricking your brain into thinking you're doing something different. I don't even carry my bank card, mostly because if there's a breach on the credit card, then they've only made charges... if there's a breach on my debit card that's STRAIGHT into my bank account - which means the money is gone until the bank decides to give it back. With a credit card, I just stop using that card until they free up the credit again. No big deal.

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