Stop Chasing High-Limit Credit Cards. Focus on This Instead

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There are a few cases when your card's credit limit is a big deal. For instance, when you're first starting out, you may get some pretty low limits. This may mean making multiple payments a month to avoid maxing out your credit card .

As your credit scores grow, however, so, too, should your credit limits. And once you have high enough limits that you aren't worried your regular monthly spending will cause a problem, well, you can probably stop worrying about the size of your credit limits altogether.

Your credit limits aren't as important when you pay in full

I'm not saying your limits have no impact on your finances. If you're using a lot of your credit line, your credit utilization will rise. (This is the ratio of how much of your credit limit you're using.) A high utilization rate can hurt your credit score, and it's generally recommended to keep your utilization ratio below 30%.

Dings from utilization are temporary, however. Your utilization is reported to the credit bureaus regularly. The best practice for credit cards is to pay your balance in full every month before your due date. Paying off your balance will drop your utilization back to zero, so your credit score will rebound as soon as the $0 balance is reported.

If you're going to apply for new credit sometime soon (such as a mortgage or auto loan), you can always pay your balance down before your statement period ends. Most issuers report balances at the close of the statement period, so this could give you a lower utilization when your credit is checked.

Work on optimizing rewards, not credit limits

Once you're not worried about chasing credit limits, you can focus on the really important card factors -- like rewards. In fact, I'd argue that optimizing credit card rewards can actually help you care even less about your credit limits.

You see, the best way to maximize your rewards on every purchase is to have several rewards cards to cover all of your major purchase categories. Foodies may want a card that offers a high rate for dining, while folks who have a long commute may get a good return on a cash back card with gas rewards.

Not only will this help you earn more rewards, but it will also spread out your regular purchases across multiple credit lines. This keeps your utilization low on individual cards, which can look better to scoring models.

The main exception: 0% APR offers

Once your limits are suitable for spending, there is really only one other occasion when the size of your credit limits will matter: if you're trying to use a 0% intro APR offer. These deals can give you 0% on new purchases and balance transfers for a year or more.

Intro APR offers are great ways to save on interest when you need additional time to pay off a balance. Of course, that means that when you're trying to use these offers, your credit limit needs to at least cover the balance you want to use the offer on.

But I'll take that a bit further. Ideally, you'll want a credit limit that is a bit higher than the balance. As noted above, a maxed-out credit card can hurt your credit quite a bit until you pay your balance down. Avoid maxing out your cards, if possible.

Your credit limit can be important -- but only up to a point. As long as you're paying your balances in full each month, which is always the goal, your actual credit limits will have little impact on your financial health most of the time.

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