Sunday, April 27, 2008

Credit Line Increase

These days especially, credit cards get a bad rap. Some personal finance "experts" like Dave Ramsey have gone so far as to encourage no one to use a credit card. I can understand some of the hatred. Many people used credit cards, for whatever reason, to spend money they did not have at the time. They then went into debt, at often ridiculous interest rates of 12%, 16%, 22%, 30%, etc., not to mention incurring a number of fees. Many personal finance blogs were started to track the progress of the blogger's paying down of their credit card debt, sometimes in the tens of thousands of dollars. Such efforts should be commended.

But a credit card themselves are not really that bad, nor is the concept of credit. While I can appreciate some people's ambivalence toward the plastic cards (and there is something to be said for the fact that people generally have an easier time spending money on plastic than cash), I think all the negative press really distorts the benefits of credit cards. Credit cards are generally safer to carry than cash, allow for better organization and tracking of one's spending, help users build a credit history and many offer rewards. I am still amazed at the ease with which I can travel internationally and quickly, easily and safely use my credit card or ATM card operating on the Visa network to pay for goods and services.

I recently requested and automatically received a credit line increase on one of my cards. As a young adult trying to establish a credit history with the hopes of buying a home in the next 5-10 years, I was pleased to see the increase. After my request, I noticed I was still given the option to decline the increase. Some "experts" might suggest that an increase would just encourage me to put more money on the card, fulfilling the card company's dubious plan. I see it more as recognition by the company that I have been decently trustworthy with their money, so they are now giving me the option to borrow more of it. It also represents a small step on the path to a positive credit history and financial freedom. Today, I, for one, am thankful to the credit card company.

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