We occasionally read on the milesopedia Facebook group that members run up against their credit limit when they want to undertake certain projects. One example is home improvements. Some will successfully ask lending institutions, by phone or even online, to increase this limit. This is the ideal way to proceed. Be aware, however, that this request may lower your credit score.
However, in case of refusal, there are other ways to increase the credit limit on your credit card. But continue to be good payers and refrain from paying interest on monthly statements. Otherwise, this would not be worth the effort.
This is called artificially increasing your credit limit.
What is an artificial credit increase?
When the amount on your credit account is greater than what is owed, you make the financial institution owe you money rather than the other way around. Your balance becomes negative and you will see it preceded by a minus sign or put in brackets. This is especially true for returns and cancellations.
In the example shown on my HSBC World Elite® Mastercard®, two flight cancellations with Air Canada caused my credit limit to increase.
Why and when should I do a credit limit increase?
You want to change your appliances? Need more credit when you travel without asking for a cash advance? Or you want to take advantage of the latest iPhone during an Aeroplan X5 promotion but your new American Express Cobalt™ Card only came with a $1,000 credit limit (which is rare, but can happen)?
Artificially increasing your credit could be the solution in the short term and on an ad hoc basis.
A credit limit of $5,000 or $10,000 may not be enough during a billing cycle. By prepaying your credit card, you artificially increase your limit!
4 strategies for artificially increasing your credit limit
The easiest strategy to do. You pay more than your statement shows and by targeting the excess amount you need.
For example, your statement shows $1,000 due. You have purchased $300 worth of goods following the issuance of the statement and have $200 worth of expenses pending. So you need $500 more credit than usual. So you deposit $1000 + $300 + $200 + $500 for a total of $2000. You are then ready to purchase the desired item.
This strategy is used by those who are careful to stay below the 30% utilization ratio of their available credit in order to have a good credit score. Remember: the information reported to Transunion and Equifax credit bureaus is not necessarily synchronized with your credit card billing statement! You may be surprised to find that the balance on your credit report is much higher than what appears on your credit card statement.
To avoid getting caught, prepay your credit card before or right after a major purchase.
You have pleaded your case with the bank officer who has agreed to refund your annual fee. It’s a small amount, but you’ll see it as a negative on your statement, which will temporarily inflate your credit limit.
The smart one
You have paid for hotel nights or refundable flights that you have cancelled.
You will therefore receive negative refunds but the credit limit will only be increased if the transactions do not appear on the same statement. Otherwise they will be absorbed by ongoing expenses.
For those with annual cash back credit cards, purchases below the cash back amount will result in a negative balance for the month.
In all cases, you use your negative balance to continue making purchases without affecting your credit limit.
Unlike conventional credit cards, the payment card has no credit limit. Therefore, it does not require the use of artificial credit limit increase strategies. American Express offers several payment cards:
But the payment card must be paid in full at the end of the month. This in itself should not bother the point hunters, since they pay their debts monthly anyway.
One of the best American Express payment cards is the American Express® Gold Rewards Card. With this card, you can earn 2 points per dollar on everyday purchases such as groceries, gas, pharmacy or travel.
Finally, prepaid cards can also be a good way to increase your ability to pay, especially since some of them offer a 0.5% discount on purchases.
At some point, we may all need more credit than our current limits allow. A face-to-face, telephone or even online consultation with our banking institution is the first solution to turn to.
There are also strategies we can use on an ad hoc basis that involve artificially increasing the credit limit. Next are payment and pre-paid cards.
So there are many ways to be able to pay for our projects! As long as you don’t go into debt by paying off your credit cards every month.