What is an unlimited credit card?

An unlimited credit card is for some the cream of the crop on credit cards. The name itself is almost self-explanatory. There is no spending limit on an unlimited credit card as long as you pay your bills on time. American Express or Amex is probably the best known of the credit cards that don't offer spending limitations. When they first did so, borrowers were expected to pay off their balances in full at the end of each month. Amex now allows flexible payments and can limit spending if payments are not adequate.

Several credit card companies now offer an unlimited credit card for people with near-perfect credit and significant amounts of income. This can be a blessing or a curse, depending on the interest rate and how wisely you use credit. For one, a huge unexpected expense can easily be met with an unlimited credit card. On the contrary, you can accumulate huge bills with unnecessary and reckless spending, in a very short period of time.

Another downside of the unlimited credit card might not be obvious to most people, but it's something noticed by organizations like the motley fool , who specializes in many finance and investment topics. Part of your credit score, about 30%, takes into account the amount of money you borrowed and the limit on your current credit cards. An unlimited credit card company may report your limit as $0 if you have not used the card, or may report a maximum limit available to you. They may not be required to report the times you put tons of spending on a credit card and then paid it off.

While some companies report their timely payments and amounts paid, others simply report an extremely low threshold. For example, if you spent $100 in United States Dollars (USD), your limit might be considered $100 or it might simply be reported as zero. You'll need to check with a credit card company about how they report payments and limits on an unlimited credit card before getting one. Some conscientious people are paying off their cards at the end of each month without even realizing it, suffering huge losses to their credit score if their spending ability scores zero, or their payments don't count towards credibility.

There are other reasons why an unlimited credit card might not be your best option, though there are also some good reasons to have one. You may not want an unlimited card if you are having trouble paying your bills or paying a higher interest rate for unlimited purchasing power. Of course, it might make sense to have one, especially for a business if you conduct most of your business on credit, paying off the balance at the end of each month. It's very easy bookkeeping and can help you spend more as needed if your business grows.

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