Balance transfers in order to increase credit limits

Balance transfers can be used to increase credit limits if a person need to increase the amount of credit available to them.  This can be done through a few simple steps, although it is a good idea that a person should be aware that it will not always be as simple as it first looks.

The traditional way of raising a credit limit is to ask the current credit cards to increase the limit, usually by calling the credit card support centre.

The reason why a balance transfer will in effect increase credit limits is that it will increase the overall credit that is available to a person.  If we take an example of two cards, one with $5,000 and one with $7,000, and these are both near the credit limits for the respective cards then if these are both transferred to a low interest balance transfer card then the new card will have $12,000 available.  There will also be two new borrowing facilities of $5,000 and $7,000 that are now available on the old cards.  This has in a stroke doubled the credit available.

In many cases the credit limit will be even higher as the balance transfer credit card also has the ability to spend on the card.  However it is usually a bad idea to spend on a balance transfer credit card as not only will the interest on this balance be higher but the interest also likely to run on longer as when there are repayments made then these repayments will be credited against the credit card spending.

There are other benefits to credit card balance transfers.  The most prominent of these are lower interest rates across the borrowing that is made using credit cards.

However with some cards there is the danger that they may lower the credit limit due to the higher total credit available to a borrower.  This is done through regular reviews of a person’s credit status, and is usually an automatic process. This may mean that a person will have more credit available than the bank feels is safe considering their credit history and salary.  This will mean that their view of a safe credit limit will also change which could mean that the existing cards will lower their credit limits.

There are dangers of increasing credit limits in that an unconscious accrual of debt may come about through too much spending and not enough budgeting.