Are there any advantages to a credit limit increase as opposed to a new card?

Question

A credit card I currently use offered me a credit limit increase. The current limit is $2500; I rarely spend over $500 on that card.

Let's say you have a legitimate reason for wanting more credit. My understanding is that requesting a credit limit increase and a new card both cause a hard pull. Since a lot of cards offer new sign up incentives, shouldn't you instead opt for one of those, assuming you can find an offer worth taking? Is there any advantage to getting a credit limit increase as opposed to getting a new card, assuming your current limit is already sufficient?

Answer 1

These are similar but one outcome is easier to manager

first: Hard Pull does negatively effect credit slightly ("new credit" on that chart)

second: A lower credit utilization ratio ("amounts owed" on the chart) increases your credit greater than a hard pull does.

In both scenarios (getting a new card vs increase on an existing card), if approved, you will have a lower credit utilization ratio, thereby increasing your credit if you keep that ratio low and pay minimums.

But if you just keep one card, and that card has a higher limit, then you will have more flexibility on the size of purchases you can make without effecting your utilization ratio. Making the option of a credit increase on an existing card easier to manage.

It is also more likely to get approved for a greater credit increase on an existing card than getting approved for a new card. (ie. its more likely you may get a store-specific nonvisa/nonmastercard/nonamericanexpress card, or a card with a low limit). So if you want to take chances with your hard pulls, know what you are more likely to get instead of wasting a hard pull.

Answer 2

There are lots of reasons to choose a credit card: effect on your score would not be the top one for me. I would use, in order:

• having at least two cards so if one is compromised and you're waiting for your new card to come in the mail, you still have one
• having different rewards perks - eg 1 card gives 4% at the grocery store, 1% elsewhere, while another gives 4% at the drugstore, 1% elsewhere. Use whichever card give you 4% at the store you're in
• having an alternate brand for the "we only take visa" or "we only take mastercard" scenarios - these are rarer these days, but still happen
• enjoying a generous signup bonus
• simplifying personal accounting such as using one card only for vacation expenses or one for needs and one for wants

And as downside:

• two annual fees if you're choosing cards with fees
• two bills to pay and possibly a service charge for paying the bill

This leads me to having 2 or 3 personal cards, no more. If I have a legit need for credit above their total limits, I would meet that by allowing the limits to be raised, not by getting a 4th or 5th card.

Answer 3

One of the scoring factors is average age of accounts. That score is dinged for new ones (obviously) but looking ahead, I'd rather have 5 10 year old accounts than 1 account with a high credit line.

In How Old is Your Credit Card I show the range of scores vs age of accounts. Ideally, you want your credit cards to be over 8 years old. Now, if only my 13 year old card issuer would stop having security breaches and when issuing a new card treat it as brand new, I'd be happier.

The sign up incentives will impact your score, of course. It's a game you should be very careful playing, especially up to two years prior to buying a home or refinancing.