Using credit cards effectively often depends on the level of credit that you have, and how you spend that credit. There are times when you might need to increase your credit limit, and times when you might need to reduce it. If you are unsure about how to adjust your credit limit to suit your needs, then follow this simple advice in order to know when to adjust your credit limits.

What are your current limits?

Before knowing whether you should adjust your credit limit, you should work out what the limits on your cards are currently. Knowing exactly how much credit you have will help you to determine whether you need to raise or reduce your credit limit, or keep it the same.

Increasing credit limits

If you find that your current credit limits are not large enough for your needs, then perhaps it is time to increase your credit limit. If you have a good credit score and have always paid on time, then you are much more likely to be eligible for an increase. Contact your card issuers and find out if you can get an increase. If you are unable to get an increase but feel that you really need one and can afford it, then look into getting an additional credit card.

Reducing credit limits

If you have recently paid off credit card debts or you have changed your lifestyle, then you might feel that reducing your credit limit is a good idea. Reducing your credit limit can be a good idea if you don't want the temptation of spending all your credit, or if you want to simplify your banking.

Problems with reducing your limit

Although reducing your credit limit can be a good idea, if you do it in the wrong way you can affect your credit rating. Your credit rating is partly calculated by looking at your available credit and current balances. If you reduce your credit limit, then the percentage of your total credit that is used will increase, and so might reduce your credit rating. If you can avoid the temptation, then keep some of your credit. However, if you think that reducing your credit is the best idea, then advise your card issuer that you want your credit lowered.

Only spend what you can afford

If you are increasing your limit rather than reducing it, you need to remember to only increase the limit to what you can afford to pay. People with good credit history can often get hold of credit limits that they cannot possibly afford to pay back. Banks operate automated credit increases if you are a good customer, regardless of whether you can really afford it. If you are to increase your limit, make sure that you really can afford to make the repayments.

Have some spare

Generally, you should always make sure that you have some spare credit for emergency purposes. If you can avoid spending the extra credit, then having spare credit can be very useful and will also show that you are a responsible spender. If you can adjust your credit limits to suit your needs then you will make the most of your credit cards and not be controlled by debt.