How To Use A Secured Credit Card With A $200 Limit
In this article you are going to learn how to optimize the use of your low-limit credit card.
A credit card with a low limit can still help you establish a credit history
When you first get approved for a credit card, it can be exciting. However, when you see that your credit limit is lower than you were expecting, it can be a bit disappointing.
This can make you question if you’ll be able to use the card for everyday expenses or big purchases like a plane ticket.
When you have a low credit limit, it’s important to come up with a new strategy for using your card.
Instead of using it for everyday expenses, use it for small, manageable expenses that you can pay off in full each month.
For example, you might use it to pay for your monthly Netflix subscription or your monthly gym membership.
By doing this, you’ll be able to make on-time payments and demonstrate responsible borrowing habits to the credit bureaus.
Additionally, you can also try to look for ways to increase your credit limit. One way to do this is by making consistent, on-time payments.
You can also try asking your card issuer for a credit limit increase after several months of responsible use.
How to use your credit card with a $200 limit to build credit
It’s important to remember that having a low credit limit doesn’t mean your credit card is useless.
By being strategic in how you use it, you can still establish a positive credit history that can benefit you in the long run.
A credit card is a tool for building credit, and with time and responsibility, you can build a strong credit history. Here’s how you can use your low-limit card in a smart way.
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Always pay on time and in full
As a first-time credit card applicant, you may not have a credit history yet. This is why it’s common for issuers to start you out with a low credit limit.
Banks have to be careful as they don’t have any information about your creditworthiness yet.
But, there is a way to build a positive credit history with a low credit limit.
You can use your credit card responsibly by making it a priority to pay off your credit card bill on time and in full.
By doing this, you’ll increase your chances of getting an automatic limit increase from the bank.
Banks usually re-evaluate your account every 9-12 months and look at factors such as credit scores, payments, the percentage of available credit you’re using.
They may also look into how long you’ve been a customer. Based on this, they may decide to increase your limit.
On the other hand, if you miss payments or pay only the minimum, it will negatively affect your credit history and cause you to rack up interest charges and penalty fees.
Banks are hesitant to give limit increases to customers who are not paying their bills on time and are always near their credit limit.
In short, to build a positive credit history with a low credit limit, it’s crucial to use your credit card responsibly and make on-time payments.
This will increase your chances of getting a limit increase in the future and help you establish a good credit history.
Maintain a low balance
Having a low credit limit can be disappointing, whether it’s a surprise or expected. For example, if you applied for a secured credit card, your limit would be equal to the deposit you put down.
In this case, if you deposited $200, your credit limit would also be $200. Regardless of how you got a low credit limit, it’s important to manage it properly.
One of the key ways to do this is by keeping your balances low. Using too much of your available credit can quickly lower your credit scores.
To maintain good credit scores, it’s recommended to use no more than 30% of your credit card limit at all times.
For example, on a card with a $200 limit, you should keep your balance below $60. The lower your balance, the better it is for your credit scores.
One way to keep your balance low is by making multiple payments each month. This will help lower your balance before your issuer reports it to the credit bureaus.
Additionally, it’s important to borrow sparingly. You can still build a good credit history by charging small amounts like a pack of gum or cup of coffee to your credit card and paying it off in full and on time.
In summary, managing a low credit limit can be challenging, but with the right approach, it’s possible to maintain a good credit history.
Keep your balances low, use no more than 30% of your credit limit and make multiple payments each month. With that you can keep your credit utilization ratio low and maintain good credit scores.
Ask for a higher credit limit
Having a low credit limit doesn’t mean it’s permanent. After several months of responsible borrowing, you can ask for an increase. This is similar to asking for a raise at work.
If you’ve been paying on time and borrowing responsibly for months, or if your income has increased, your chances of getting approved for an increase are better.
Keep in mind that requesting a limit increase can cause a hard pull on your credit report and may temporarily lower your credit scores by a few points.
However, if it helps you increase your limit and gain more flexibility, it may be worth it.
It’s important to note that you should only request a credit limit increase if you have a good reason for it.
For example, you may need the increased limit to make a big purchase or to handle an emergency expense.
Additionally, you should only request a credit limit increase if you are confident that you will be able to continue using your credit card responsibly and making on-time payments.
In conclusion, having a low credit limit doesn’t have to be permanent. You can request a limit increase if you’ve been using your credit card responsibly and your income has increased.
Just keep in mind that requesting a limit increase can have a short-term effect on your credit scores, but it may be worth it if you need the increased limit.
Want to cancel your credit card? Learn how to avoid damaging your credit score
If you decide to cancel your credit card, know that it can drop your credit score a little. But if you really need to, we’ll tell you the best way.
Just read the following article and get our valuable tips. Take care of your finances!
About the author / Danilo Pereira
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