How can You Increase Your Credit Card Limit
Some of you might have received an e-mail with the subject line "Good News- Your Credit Card Limit has increased"
On the one hand, where you got excited with the thought that now I have more buying power, but, on the other hand, you keep thinking, I have not opted for this. How did it happen? Don't worry; this is given to you. The bank keeps an eye on the spending habits and your accounts. And in some cases boosts the credit limit. We are quite sure; almost most of you want to have a high credit limit.
So, don't wait for that magical e-mail. It's time to take action in the right way. And, before that, why not understand what all factors impact your Credit Card limit.
Every Credit Card has a credit limit which decides how much an individual can spend each month. The bank sets this credit limit depending on the information you provide like your monthly income, age, gender, occupation, etc. It is essential to manage the set limit on your Credit Card as set by the banks, as it helps in establishing good credit scores and staying out of debt.
How does the bank determine the credit limit?
When you apply for your credit card at the chosen bank and submit your respective documents for the same, the bank analyzes it from various perspectives. Factors like your income source and repayment history plays a pivotal role in getting you a higher credit limit on your credit card.
The enhanced limit gives you the liberty of spending more. It is proof that you have utilized the Credit Card responsibly. A higher Credit Limit will mean good things for your credit score. The banks review your each and every transaction and automatically raise the criteria if it meets their requirements.
Bad Credit History like non-repayments of EMIs or late payment of liabilities, low- income level, etc. might approve you a low credit limit in initial days. However, if you make wise use utilization of your credit card and make all the payments on time responsibly, the limit on the credit card can be increased.
Here are a few ways to get the credit limit increased.
1. Requesting the Credit Card Issuer
Some Credit Card issuer raises the Credit Limit on the request of the applicant. You can log in to the bank's website to apply for an increase in the limit amount. You can even call the customer care facility available with the respective bank and request for the increase in your credit card limit.
You will be required to provide some additional information to process the request.
2. Improving the Credit Score
550 & Below
Higher Credit Score helps in raising your Credit Limit
The first and foremost factor taken into consideration by banks is your credit score. A higher credit score will determine a reasonable credit limit. It is essential before applying for the credit card that you clear all your previous dues and debts on time. It is also essential to keep your spending limit within the range to avoid getting into unnecessary debts.
The second biggest factor affecting your credit score is your credit utilization. If your credit utilization is 0% it means you are not using any of your available credit. Usually, a good credit utilization ratio is less than 30%. This implies you're using less than 30 percent of the total credit available to you.
Credit Utilization Ratio= (outstanding balance on all credit cards/Total credit extended on all credit cards) * 100
3. Requesting the lender annually for increasing the limit
Most banks offer an increase in the credit limit annually if the dues are paid on time. You can enquire about the same with your respective bank. The bank offers good rewards on the increase, which instantly boosts your spending limit. You can utilize the higher credit limit when faced with the shortage of money during urgency.
4. Updating the Bank about your Increment
You will have to update the bank about the hike in your income. An increase in your salary will make you eligible for a higher credit limit on the credit card. The bank may increase your limit on the existing credit card or issue you a new credit card with upgraded rewards and offer along with the increase in the limit, matching your current financial status.
5. Applying for a New Credit Card
Apply for a new credit card to get an increase in your credit limit. If you have made the timely payments of your previous credit card and have utilized the limit within the range. This will not be an issue with the bank to provide you with the same.
6. Have Patience -
Be Patient. Wait for at least 6 months before making out a new request.
7. Repay dues on time
You can’t convince a lender to increase your credit limit without paying off dues on time. Hence, make sure your dues from the previous months are cleared. By this, you will be considered as a responsible and less risky customer.
How Credit Limit Affects your Credit Score
The credit score of an individual is dependent on the usage of the credit card as per the limits set by the bank. Every month user's credit limits and credit utilization are reported to credit bureaus. Based on this information, a ratio is calculated, termed as Credit Utilization Ratio. Generally, 10 to 30 per cent is considered a good ratio. It is recommended to keep the credit utilization ratio low, to gain an excellent credit score. Increasing the usage of credit cards than the credit limit is bad for your credit score as it will hamper the ratio of credit limit to credit utilization.
During times of emergency, the credit limit always comes in handy to be utilized to its full potential. It is important to keep a check on the usage of credit cards than the offered limit amount on them.
Benefits of Increasing the Credit Limit on Your Card
1. Effective at times of Emergency
Critical situations in life erupt without prior notice. And one may or may not be capable of dealing with the situation financially. Credit cards come to the rescue in such situations, which require immediate monetary assistance. Additionally, credit card transactions can be converted into instalments which make the transactions easily repayable.
2. Perks and Benefits
Credit Cards with higher credit limits come with additional perks and benefits. Perks in terms of rewards while performing online transactions or offering complimentary travel insurance.
3. Easy availability of loans
You stand a good chance to avail loans at attractive interest rates. The banks or financial institutions find it easier to approve the loan application of individuals having a good credit score.
Why should you not reject the increased credit card limit?
Old Credit Card Limit = ₹ 70,000
Credit Utilization = ₹ 35,000
Credit Utilization Ratio = 50%
Revised Credit Card Limit = ₹ 1,20,000
Credit Utilization = ₹ 35,000
Credit Utilization Ratio = 29%
So, we can see an increase in card limit can significantly lower your credit utilization ratio.
What is the maximum credit card limit in India?
The credit card limit of an applicant is at the complete discretion of the bank. It entirely depends on the income, age, repayment capability of the individual. Usually, most of the banks offer a maximum credit limit of ₹ 10,000,00.
These simple steps help you accelerate your Credit Card limits and ultimately, the purchasing power.
Read here, which is the Best Credit Card in India.