Don't you love it when you get a letter saying we have decided to increase your credit limit /$x amount. Instantly what do I need or want to get and how much extra money do I have available to spend are my initial thoughts.

This is not the best way to look at this sure you have access to more money but is it really positive if we replaced credit with debt it wouldn't seem so tasty.

We have decided to increase your debt limit. Does that make you think what do I want to get in debt for? Of course it doesn't but the terms are interchangeable.

Credit card scannerWe need to change credit to debt every time we see a sales letter or get an offer for an increase in credit, sure an increased debt allowance means more available money but unless this money is showing a return you will be paying it off for a longer time.

Credit is beneficial when used for investing as you can check if your debt's interest rate is lower than the proposed return then its a sensible decision but if you couldn't afford those new shoes, jacket or laptop then even with a credit increase you still cant afford them.

A way to justify luxury purchases is if you have a steady job or you are receiving a bonus then buying shoes, jacket or laptop on credit isn't so detrimental to your financial position but stop to think how secure is your job with 600,000 jobs lost each month in the US and the UK making mass lay-off's your job may not be as secure as you would of thought.

The solution

Manage your money and see the benefits one tip if you have multiple credit cards start to pay off 10% of the card with the highest interest rate and minimum on the others this way you can target the main sources of your debt and clear them, then move onto the next highest interest rate I would advise to cut up the card once cleared to stop you falling into a 39% APR trap but its your choice.