When it comes to personal spending, using credit cards is the new preferred payment method for Americans. The old adage “cash is king” no longer applies, especially since we can add our credit cards directly to our mobile phones now. I receive all kinds of questions about credit cards and how to get ahead with personal finances. In this article I’m going to focus on one particular question I often get asked: Can I overpay my credit card to increase limit?
It is an interesting thought, isn’t it? I can see how you would think that overpaying your credit card shows the company you are able to handle a larger limit. But the truth is, even if you overpay your credit card bill, the company will not raise your limit. In fact, this really has no impact except for starting off next month in the negative.
But hey, if you are able to pay off more than you owe, that is a good sign you are financially stable. There are too many Americans who cannot pay off their credit card bills at all. Even if you can overpay your credit card, there really isn’t any incentive to do so. You might as well put that money to work somewhere else!
As much as it might seem like a positive move, there is no benefit to overpaying your credit card. The credit card company will not increase your limit and it will not have an impact on your credit score either. So what is the benefit of overpaying your credit card? Well, you know for sure that you won’t be paying any interest for that month!
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The only result of overpaying your credit card is that you pre-pay off some of next month’s bill. Is that really worth it? If you have the cash in hand now it is better to just put it away into savings or investments. Your credit card balance should not be treated like another savings account where you can put away funds for future bills.
Should I Pay Off My Credit Card in Full or Leave a Small Balance?
This is a question I have been asked as well. For some reason, some people believe that leaving a small balance on your credit card will improve your credit score. While it is true that the lower the balance the more it raises your score, nothing is better than a zero balance at the end of each cycle.
In fact, the fastest way to improve your credit score is to reliably pay off your balance every month. Remember that any balance you leave outstanding can be charged interest. As of April 2023, the average credit card interest rate in America is a staggering 24.20%. Even if it’s just a few dollars, that interest can add up in a hurry.
I know that these two topics are the extremes. We went from discussing the overpayment of a credit card to not paying enough. Neither strategy is worth it and neither will put you ahead in terms of your credit limit.
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How Can I Raise My Credit Limit Without Asking?
Of course, you can always just request your credit card company to raise your limit. But if you don’t want to ask, there are some ways to do so organically. The most common way to do so is to pay off your monthly balance in full each month. Nothing too complicated about that! If you ask me, this is the expected behaviour when you use a credit card for purchases. It helps to use a budgeting app as well, so you can ensure you are maximizing the chance of improving your credit score and limit.
Another way you can potentially get a credit limit raise is if you update your profile with the credit card company. Changing your job or increasing your annual salary could bump you up a couple of levels. Any increase in wages will be seen as a positive by the credit card company because it indicates an increase in your buying power as well.
What Happens If I Overpay My Credit Card Limit?
Nothing, aside from a small head start on next month’s bill. In fact, some credit card companies will even see it as a negative if you overpay your credit card limit. Why? Because overpaying credit card balances is one way that criminals carry out fraud and money laundering.
If you overpay your balance by a large amount it could very well trigger a fraud warning. According to American Express, money launderers will often do this to move money through a legitimate vehicle. Typically when you overpay your balance you aren’t doing so by such a considerable margin. But if you do, just know that you could be setting off some red flags at the credit card company.
So there you have it, there truly is no benefit to doing this and there could even be some repercussions. Overpaying your credit card bill does nothing to get you ahead of the game. If you think your credit card company will appreciate it, think again! It seems like it just makes more work for them. Besides, overpaying by minimal amounts is just a drop in the bucket for a company like Visa or Mastercard.
The Bottom Line: Can I Overpay My Credit Card to Increase My Limit?
Nope, sorry to be the bearer of bad news but this is not possible. If you really want a credit limit increase, just ask! As long as you have been paying off your credit card balance in full each month, your credit card company will probably have no problems with it. In fact, it benefits the card provider because you have the potential to be using the card more.
I hope that helped explain why you can’t raise your limit by overpaying your credit card balance!
Geek, out.