A No Limit Credit Card: Problem or Privilege

The Benefits

The benefits of having a no limit credit card are obvious. First and foremost, you never have to worry about maxing out your card, exceeding your credit limit or being slapped with an over-the-limit fee. Add that to the prestige of having a credit card without any credit limit, and it seems like quite an enticing idea.

The Drawbacks

If you do qualify for a no limit credit card, you might want to think carefully before accepting it. Having a no limit credit card may actually have a negative effect on your credit score.

When your credit score is calculated, the amount of money you owe versus the amount of credit you have plays an important part of the credit scoring process. For example, if you have a $5,000 credit limit and you only owe $500, you’ll have a better credit score than if you have a $5,000 credit limit and owe $4,000.

Because a no limit credit card doesn’t have a credit limit, it will often show up on your credit report as being a maxed out credit card. So if you owe $3,000 your credit limit would be figured as $3,000. In other words, it’s appearing as though you’ve used all of your available credit as far as your credit score is concerned. Because of this, your credit score will be lower than if you used a card that actually had a set spending limit.

If you’re worried about how a no limit credit card would affect your credit score, you should opt to apply for a credit card with a spending limit and close any no credit limit accounts.

This credit directory website has a number of low APR interest credit cards listed.