Should I get a new credit card or increase my credit limit?

If you’re looking for more financial flexibility and purchasing power, you might consider applying for a new credit card or asking for a higher credit limit on an existing card. 

Both strategies could be helpful. But how you go about it and the way they affect your credit scores can differ.

What you’ll learn:

• A new credit card may offer opportunities for new rewards and better terms.

• A credit limit increase could offer a spending boost without another account to manage.

• When deciding which option might be right for you, you can consider the impact on your credit scores and overall finances.

If you’re approved for a new card, it could offer benefits beyond just spending power, including:

1. More rewards: A new card could give you the opportunity to earn more rewards, including bonuses for new cardholders. For instance, if you’re planning a trip, you could earn rewards miles to help cover travel costs. Cash back rewards could also add up over time as you use the card.

2. Lower interest rates: If your new card has a low introductory annual percentage rate (APR), it could help you avoid interest if you’re planning a large purchase or consolidating debt. Remember, though, that introductory rates are temporary.

3. Lower credit utilization: If you get more credit but maintain the same spending habits, it can lower your credit utilization ratio. That’s the percentage of available credit you’re using across all your revolving credit accounts. Credit utilization is an important factor in the calculation of your credit scores. The Consumer Financial Protection Bureau (CFPB) recommends keeping your ratio below 30%.

Requesting a credit limit increase on an existing credit card is another way to access more credit. It also can affect more than just your purchasing power. Here are three reasons you might consider a credit limit increase:

1. Lower credit utilization without impacting your credit history: If you don’t increase your spending, a higher credit limit can lower your credit utilization ratio the same way that getting a new credit card can. And it won’t lower the average age of your credit history, another credit-scoring factor. 

2. May not require a hard credit inquiry: If your issuer doesn’t perform what’s called a “hard pull” to review your request for more credit, it won’t affect your credit scores the way a new application might.

3. No new account to manage: A credit limit increase on an existing card may be easier to manage than an additional credit card account.

When you’re debating between getting a new card and increasing your credit limit, it could help to consider the following:

The first step to getting a new card or a credit limit increase is getting approved. For a new card, issuers may look at your credit reports, credit scores and income to determine whether to approve your application. 

With a credit limit increase, your card issuer might review your credit history. It may also look at how long you’ve had the card, how you’ve used it, your income and more.

Both a new card and a credit limit increase have the potential to affect your credit utilization ratio.

If a hard credit inquiry is involved, you may see a slight drop in your credit scores. Too many hard inquiries in a short period of time may have a longer-lasting negative impact on your credit scores. Not all issuers conduct a hard inquiry for a credit limit increase, but some might. Capital One doesn’t require a hard inquiry for a credit limit increase.

A new credit card could also affect the average length of your credit history.

A new card or a credit limit increase will typically give you more available credit, which could make it tempting to spend more. But doing so could make it harder to pay off your credit card debt. And carrying a balance could increase your credit utilization ratio and lead to higher interest costs.

Here’s an overview of how getting a new credit card compares with increasing a card’s credit limit:

Check out the answers to some frequently asked questions about getting a new credit card versus requesting a credit limit increase.

Applying for a new credit card and requesting additional credit on an existing card are two ways you might increase your spending power. It can help to think about how your decision might affect your credit scores and overall finances. 

If your need for additional funds is temporary or occasional, you may be able to check whether a purchase beyond your current credit limit could be approved. 

If you decide a new card is the right move, Capital One has a rewards card to fit your lifestyle.

• See if you’ll be approved for Capital One credit cards with 100% certainty—with no harm to your credit scores. 

• Explore travel rewards cards with unlimited miles you can actually use. 

• Earn unlimited 1.5% cash back on every purchase, every day, with a cash back rewards card. 

• Earn cash back on food and fun with a dining and entertainment rewards card.