Should You Increase Your Credit Card Limit?

Offered a credit card limit increase, or thinking of asking for one?  A higher limit when managed responsibly can offer greater financial flexibility and improve your credit score.

What is a credit limit?

If you have a credit card, you are approved by your bank to spend up to a maximum amount and this upper boundary is your credit limit.  Your limit is determined by factors such as your income, credit history, existing debts and overall financial profile.

Benefits and considerations of a credit limit increase

Does a credit limit increase affect my credit score?

If you’ve been pre-approved for a credit limit increase, your bank may make what’s called a ‘soft inquiry’ on your credit report, which does NOT affect your credit score. On the other hand, if you request a credit limit increase, it may involve a ‘hard inquiry’ on your credit report, which could cause a temporary dip in your score.

The more important factor, however, is how you use the additional credit. A limit increase can help your score or hurt it – depending on how responsibly you manage your spending.

Tip: You can check your credit score for free online through credit bureaus like Equifax or TransUnion. If you’re an RBC customer, you can also check it through the RBC Mobile app or  RBC Online Banking.

Advantages of a credit limit increase

How does an increase in your credit limit help?

A higher credit limit can help in a few key ways – from improving your credit score to giving you more flexibility when unexpected costs arise.

1. It can improve your credit score

Raising your limit reduces the percentage of available credit you’re using, known as your credit utilization ratio. If your spending stays roughly the same, this can improve your credit score.

For example, if you have a $2,000 credit limit and your monthly balance is regularly about $1,800, you’re using 90% of your available credit. If your limit increases to $6,000 and your balance remains similar, your utilization drops to 30% – a level that financial experts generally consider healthy.

A lower credit utilization ratio shows lenders that you manage credit responsibly, which can strengthen your credit score over time. It can also make it easier to qualify for loans, mortgages or other credit products in the future.

2. It offers flexibility for larger purchases

If you have big-ticket purchases that come up every now and again, like vacation costs or home improvements, your current credit limit may not be high enough to cover your everyday expenses in addition to a larger one.

3. It provides an emergency cushion

Having extra room on your credit card can give you peace of mind knowing that you can quickly cover unexpected expenses, such as car repairs or an out-of-pocket health expense, should it arise.

4. It helps you avoid overlimit fees or declines

If you often come close to your credit limit, increasing it can help you avoid having transactions declined or being charged over-limit fees, which typically range from $25 to $30 each time¹.

Things to consider before you decide

A credit card limit increase isn’t for everyone. If you know you’re likely to spend up to your limit, no matter how high it is, the risk of carrying more debt will outweigh the benefits.

Before increasing your limit, think about:

• Whether you tend to spend up to your limit

• If you’re carrying existing balances on multiple cards

• Whether you can consistently pay more than the minimum each month

• How you plan to use the extra credit – i.e., for emergencies or daily spending

If any of these give you pause, a credit limit increase may not be the right choice for you right now.

Bottom line

A higher credit limit can be a useful tool, offering flexibility, the opportunity to improve your credit score and extra breathing room when you need it. But it only works in your favour if you manage it wisely.

If you struggle with impulse buying or rely heavily on credit to pay for day-to-day expenses, it may be worth passing on the increase. Exploring alternate, lower-interest forms of credit may be a better option to help you reduce credit card debt and pay down your outstanding balances sooner.

Before you request or accept an increase, be sure to consider your credit and spending habits to determine if it’s the right decision for your finances.

How to increase your credit card limit?

Increasing your RBC credit card limit is fast and easy.

If you’ve already been pre-approved

• Sign in to RBC Online Banking and follow the steps presented. 

Or to request an increase

• Sign into RBC Online Banking and select your RBC credit card. On the right side of the page, select Change credit limit and follow the instructions.

• Call 1-800-769-2512