I Don't Keep Track of My Credit Card Spending Limits. Here's Why

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In my book, there is only one answer to the question of whether a credit card has a good credit limit: Does it accommodate your spending? If yes, then you're fairly well-set. Beyond that, you really don't need to bother with trying to get larger limits.

I have more than a dozen cards, and I honestly couldn't list the credit limit for any of them. They accommodate my regular spending, and I pay in full each month. I don't bother with the rest.

Pay in full and spread the debt

Sure, you probably want to keep an eye on your balance and credit limits if you're trying to rock a one-card wallet and all of your expenses are going on a single card.

That's not me.

I'm one of those rewards geeks who tries to maximize every purchase, every time. This means many of my monthly purchases are spread out across various "specialty" cards to get the best return.

While it takes some work to maintain, my strategy gives me an effective 3% cash back on nearly every purchase. It also has the side benefit of keeping my balance well below my credit limits without having to think much about it.

Moreover, I rarely carry balances. I'm paying my cards off in full each month, so the debt (and interest) can't accumulate.

That said...

There are definitely a few cases in which I do pay pretty close attention to my credit limit.

When I'm relying on an intro APR offer

If I have a large purchase and know I need to carry it for a few months, I always put it on an intro 0% APR card. (Timely reminder to get your furnaces checked before winter, friends.) As such, this is the most common reason I'd care all that much about my new card's credit limit.

Since my whole reason for getting the card is to cover a specific purchase, I want the credit limit to at least accommodate that purchase. (The same would apply to a balance transfer card, too.) Ideally, I'd like it to be larger for utilization purposes, but I'm only typically concerned with that when I'm going to apply for new credit soon.

Which brings us to the second case.

When I'm applying for a loan

A big part of your credit score (30% for the FICO scoring formula) is your utilization, or how much of your available credit you're using. If you have high utilization, it hurts your credit score. Models look at your overall utilization -- your total debt across all credit lines -- as well as the utilization of each credit line.

So, if you have five cards with a $0 balance and one maxed-out card, that one maxed-out card will still hurt your credit score.

Most card issuers report your balance to the credit bureaus at the end of the statement period. If you have a high balance relative to your credit limit, it could cause your credit score to go down due to the increase in your utilization.

However, the impact isn't permanent. Your score bounces back as soon as a lower balance is reported. If I know I'm going to apply for new credit soon, I try to pay off my card balance before the statement closes so the reported balance is low.

When I'm after the welcome bonus

I love welcome bonuses. I've earned thousands of dollars in cash back and points over the years thanks to these wonderful perks.

However, they aren't necessarily a given. You usually need to make a certain amount of purchases on your new card to earn them.

Often, if I know I have a large purchase coming up, I'll hunt down the best welcome bonus available at the time and open a new card. So, as a rule, I prefer my credit limits to be at least equal to, though preferably a bit larger than, the spending requirement to earn the welcome bonus.

When cards don't meet the minimum

Sometimes you get a credit limit that is just too low to make the card work for you. In this case, you have a few options:

• Request an increase: You can contact the issuer and request a credit limit increase. If you have a good credit history and income, the issuer may boost your limit. (Some issuers may require a hard credit pull.)

• Make multiple payments: Most issuers don't limit how many payments you can make each month, so you can pay your card in full whenever you're closing in on your limit. Anecdotal evidence suggests this can trigger the issuer to increase your credit limit on its own.

If neither of these strategies works, you may need to move on. Not every card will be right for every cardholder. Sometimes we have to chalk it up to a lesson and look elsewhere.

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