Approved for a Credit Card With a Low Credit Limit
Finding out you’re approved for a credit card is great news. But finding out you’re approved for a credit card with a low credit limit can be disappointing. You may have been hoping for a credit card with a four-digit credit limit only to be approved for a few hundred dollars. While it may not seem worth it, it can be wise to keep the card even though it has a low limit.
Why is Your Credit Limit So Low?
There could be a few reasons that your credit card was approved for such a low credit limit. First, the type of card you applied for may give all cardholders at the same limit. This is often true for retail store credit cards and subprime credit cards, but it can happen with other cards, too. A poor credit history, or lack of credit history, can also be the blame. High credit card balances or low income are other reasons for a small credit limit.
Dealing With a Low Limit Credit Card
Unless this credit card has a significantly lower limit than all your other credit cards, don’t close it. If you don’t have any other open credit cards or you’re working to rebuild your credit history, this low limit credit card can help you improve your credit. A better credit score will help you get approved for credit cards with higher limits.
Your credit score responds best when you keep your credit card balances low relative to the credit limit. This can be hard when you have a credit card with a low limit. But, for now, use your credit card for small purchases only and be sure to make your payments on time each month. The best credit card balance is 30% or less of your credit limit. To put it into perspective, that’s $100 on a credit card with a $300 credit limit.
Getting a Credit Limit Increase
Some credit card issuers will raise your credit limit automatically after you’ve used your card responsibly for several months. The time period varies by credit card issuer but can range from six months to a year. If you haven’t received an automatic credit limit increase after six months, you can contact your credit card issuer to request a credit limit increase. Some allow you to do this through your online account. Otherwise, you can call customer service to request an increase.
If your increase request is denied, you’ll get a letter letting you know why. Work on improving your credit in those areas so you can qualify for a bigger credit limit next time.
After about six months of responsible credit card usage, you can also try applying for a credit card with another credit card issuer. This time, your attempt to get a bigger credit limit may be successful.
Finally, if you can afford it, you can get a secured credit card and pay a higher security deposit. (Your credit limit is usually equal to your security deposit.) While you may not want to tie up your money this way, it can benefit you since secured credit cards are reported on your credit report just like other credit cards.
Having a credit card with a higher credit limit on your credit report will look favorable and make it more likely that you’ll be approved for a regular credit card with a high credit limit. As long as you keep your secured credit card in good standing, your security deposit will be refunded when you close the credit card or its converted to an unsecured account.