I've had a balance on my credit card for sometime now. It's pretty close to my credit limit, so I can't make much use of the card. I understand the obvious benefit of having a higher credit limit - more money to spend; but are there any other significant benefits of increasing a credit limit that I should consider before I ask my bank to raise my credit limit?

I’m not sure you should think of an increased credit limit as “more money to spend” – perhaps you should think of it as “more debt to get into.” A credit limit isn’t license to spend beyond your means to pay the money back, and it sounds like you’re not paying your debt back very fast as it is.

That said, asking for a higher credit limit is a good idea, for the following reason: it will lower your credit utilization ratio. What’s that, you ask? Your credit utilization ratio is the amount of your credit limit that’s tied up. Credit bureaus like to see you keep this number under 30 percent – in other words, if you have $30,000 of available credit, you should keep your balance under $9,000.

If your balance is sitting right at the top of your maximum credit available, then asking for a higher limit can help your credit score – provided you don’t use that newly available credit! My advice is, get the increase, and then pretend you never got it. Make a plan to pay as much as you can each month toward that stubborn balance – double the minimum payment is a good guideline, but if you can’t afford that, just pay as much as possible. You want to get that debt-to-credit ratio under 30 percent as soon as you can – and ideally, pay of the balance completely.