Yes, you too could increase the purchasing power of your Discover card. Here’s how.
Like other credit card issuers, Discover’s credit limits are not set in stone. Cardholders can always request that their cap be lifted, and if they’ve exercised sufficient fiscal prudence and responsibility, Discover is likely to grant that wish.
This is because an increase in the credit limit potentially benefits both the cardholder and the issuer. After all, assuming all things are equal, having more credit available to its cardholders increases an issuer’s opportunities to make money with them (via interest charges, fees , etc.).
Notice how we characterize the odds of a safe and reliable cardholder with the word “probably”. Even for the most deserving customers, a Discover credit increase is not guaranteed. There are several important factors in the issuer’s decision, and some best practices and tips you should know before hitting the submit button on your request. Let’s dive into it.
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First of all: what is a credit limit?
Simply put, a credit limit is the maximum amount a creditor will allow you to borrow. In the credit card world, this is the amount your issuer allows you to spend on each of their cards.
The Issuer sets the credit limit based on a number of factors including, but not limited to:
- Your credit usage, which is how much of your available credit is being used.
- Your payment history of card statements on time.
Whether you tend to pay off your debt or only make the minimum payments set by your issuer (usually this is a small percentage of your unpaid debt).
Important decision factors to discover
Each credit card issuer weighs the factors of a credit limit increase request differently, although the ones mentioned above are almost always critical. Discover places particular emphasis on these factors:
- Opportunity. Discover points out that credit card customers who do not pay their statements often or consistently on time are referred to as “threats of non-payment.” No one likes a threat; being labeled as such is unlikely to earn a cardholder an increased credit limit.
- Credit utilization rate. This is how the use of credit is measured. This is the credit used as a percentage of the overall limit. This is essential for your credit score (about a third of it); Of course, Discover and his peers like to see a relatively small number here.
- High income, low expenses. It’s not just about how an applicant manages their cards. Discover says that a healthy gap between total income and overall expenses is an important factor in its decisions about credit limit applications.
- Story. The longer an applicant’s credit history, the more confident the issuer will be in their decision to increase or not to increase credit limits. It almost goes without saying at this point that an applicant cardholder’s history should be rich in timely payments.
- Number of recent requests. A person asking for a credit limit increase shouldn’t have had too many credit requests in the recent past. This, according to Discover, could indicate that the applicant poses too much credit risk to issuers.
How to request a Discover credit increase
It is in the best interests of issuers to apply for a credit limit simple and straightforward. This allows them to complete the process relatively quickly and increase the potential interest charges and other forms of compensation that come their way.
Discover’s two main ways to apply for a credit limit are:
- By telephone. Cardholders can call the main Discover number (1-800-DISCOVER or 1-800-347-2683) to make their request orally. Applicants should be prepared with the following information (although the company may inquire about other factors):
• Current total income
• Current housing expenses (a key part of the cost side of a credit limit decision)
• The different types of financial accounts held (checks, IRAs, brokerage, etc.)
- In line. This is done through your account portal; Log in to access the site’s credit limit request page. When applying online, it is also wise to have the above information handy or easily accessible.
Dos and don’ts after increasing your credit limit
If all goes well, Discover will accept your request to increase the credit limit. When this happens, you may be tempted to splurge on one or more shopping sprees. It’s not a good idea; First, it will wreak havoc with your credit utilization rate, second, it will add to debt that you might have more trouble paying off.
Discover is familiar with cardholders who let their spending get out of hand. The company has a set of great suggestions for avoiding debt, including:
- Not shopping as a hobby. There is a big difference between want and need. In an age when millions of products are just a click away, it can be hard to resist the temptation. Discover suggests putting effort and energy into other satisfying hobbies.
- Save money in a savings account for emergencies, and add to it regularly. This will provide a source of funding for critical one-off items. It is much better to pay these charges out of pocket rather than with an interest-bearing credit card.
- Put a ceiling on your housing costs. Americans are prepared to pay dearly for a comfortable life. Personal finance experts recommend limiting housing costs to around 30% of income. This should leave enough room for other essentials, as well as some discretionary spending.
By all means, after a credit limit increase, you should spend a little more on yourself and your loved ones. But not to excess. An acceptable usage rate has probably helped you push that limit higher, don’t waste it.
It’s also good not to use that confidence I just raised to go crazy asking for more credit limit increases and / or new credit cards. Too many inquiries about increase requests and new card requests can hurt your credit score. On top of that, they can signal that you are taking too much credit at once. Potential issuers don’t like it; it looks irresponsible.
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