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-figure credit limit only to be approved for a mere few hundred dollars.
While it may not seem worth it, it can be wise to keep the card despite the low limit. Here's what you can do.
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 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 to blame. If you're just starting out with credit or you have some blemishes on your credit report, you may need to build your credit before you can get approved for higher credit limits.
High credit card balances or low income are other reasons for a small credit limit. Credit card issuers want to be sure you can afford to repay any balances you're allowed to charge.
Dealing With a Low Limit Credit Card
Unless this credit card has a significantly lower limit than all your other credit cards, it's may be worth keeping it open. 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. You'll need an opportunity to add positive payment history to your credit report.
A better credit score will help you get approved for credit cards with higher limits.
Your credit score responds best when you make your payments on time and 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. Your payment history makes up 35% of your credit score. 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 credit card issuers allow you to request a credit limit increase through your online account. If you don't see the option when you login, you can call the number on the back of your credit card to request an increase.
If your increase request is denied, you’ll get a letter from the credit card issuer explaining why. The letter gives you insight into opportunities to improve your credit score, improving your chances of qualifying for a higher credit limit in the future.
After about six months of responsible credit card usage, you can also try applying for a credit card with another credit card issuer to see if you're approved for a higher credit limit.
Finally, if you can afford it, applying for a secured credit card and paying a higher security deposit can allow you to get a higher credit limit since your credit limit is typically equal to your 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. and paying a higher security deposit can allow you to get a higher credit limit since your credit limit is typically equal to your deposit.
- Keeping a credit card with a low credit limit can help you boost your credit score to qualify for higher credit limits later.
- You may be able to request a credit limit increase from your credit card issuer.
- Consider a secured credit card where your credit limit is equal to the security deposit you make.