Nationwide, the building society with over 16 million customers, has issued a crucial reminder for anyone with a credit card or considering applying for one. The message emphasizes caution, especially for those thinking about increasing their credit card limit.
Key Considerations Before Increasing Your Limit
The building society advises that before you increase your credit card limit, you should evaluate several factors. These include how much you can realistically afford to repay and being fully aware of any potential risks.
While a credit card limit is determined by individual circumstances such as income, outgoings, and credit file, Nationwide reassures customers: "We won’t increase your credit limit unless you ask us to. A higher credit limit could give you more flexibility. However, it may increase the risk of you taking on too much debt."
This could cost you more overall and take longer to pay off your borrowing. Therefore, consider carefully if you truly need a higher limit.
How to Request a Limit Change
Nationwide allows customers to request an increase or decrease to their credit card limit. If accepted, the new limit applies immediately. However, once changed, you must wait six months before applying for another increase. You can reduce your limit at any time.
Understanding Credit Cards
A credit card is a convenient way to manage money, allowing you to pay for goods and services on credit and spread the cost over time. When using a credit card, you are borrowing money from the card issuer, typically a financial organization like a bank or building society.
Credit Card vs. Loan
Both credit cards and loans involve borrowing, but they differ. A credit card provides a set spending limit you can use as needed, with the option to pay off the full balance monthly or in installments (interest may apply if not paid in full). A loan offers a lump sum upfront, repaid in fixed installments over a set period, usually with interest.
Choosing the Right Credit Card
Nationwide urges people to consider why they want a credit card and how they will use it, as different cards have different features. Common reasons include reducing existing debt, spreading large purchases, making commission-free purchases worldwide, improving credit scores, clearing debt while spending, and earning cashback or rewards. Once you determine the purpose, compare offers to find the best fit.
