how to increase credit card limit in english
There are many benefits of increasing the credit card limit. This not only increases your access to instant credit but also helps in improving your credit score through a lower CUR (Credit Utilization Ratio). Apart from this, it can also provide you a loan amount against credit card option to meet your financial needs or financial crunch.
While there are many benefits associated with increasing the credit limit, the question that arises is how to increase the credit card limit? Here, in this article, we will look at several aspects related to credit card limit and also discuss how to increase credit card limit? ,
What is credit card limit?
Credit card limit is the maximum credit amount that a bank allows to its credit card customers to spend using the credit card. Initially, credit card issuers allow a lower credit card limit for those who are ‘new to credit card’ applicants. Later, such cardholders are offered an increased credit limit as their bank is assured of an increase in their income, better credit score and good repayment behavior. Remember that card users can initiate the process of increasing the credit limit by directly communicating with their bank and submitting the required documents.
How do banks calculate your credit card limit?
The credit card issuing bank considers several factors to determine your credit card limit. They review your credit history, your credit score, your annual income, your employment status, etc.
Benefits of increasing credit card limit
Before knowing how to increase credit card limit, one must be well aware of the benefits associated with credit limit increase. It is important to know their benefits as there are many credit cardholders who decline the credit limit increase offer for fear of getting stuck in a loan cycle due to increase in credit card spend. What such card users fail to understand is that it is not the increased limit, but the tendency to spend more than one’s repayment capacity, which puts them in a debt trap.
Here, we will list 4 benefits of increasing your credit limit:
1. Improves Your Credit Score
For credit score calculation, credit bureaus basically look at your CUR (Credit Utilization Ratio). The CUR is part of the total credit limit you have used. Generally, banks consider a CUR of more than 30% as a mark of over-utilization of credit, which means that individuals with CURs above 30% are more likely to be defaulters than those with lower CURs. Credit bureaus lower your credit score even further if you consistently break this 30% mark for CUR. Thus, it is important to maintain a CUR of less than 30% to build and improve your credit score.
For those who consistently breach this 30% CUR limit, one of the best ways to include CUR within the recommended limit is to accept an offer for a credit limit increase from an existing card issuer or go for a limit increase directly on your own. to apply for Those who are not able to enjoy the increase in credit limit on their existing credit card can apply for a new credit card from any other credit card issuer.
For example, suppose you typically spend Rs 40,000 per month through your credit card, with a limit of Rs 1 lakh. Your CUR (Credit Utilization Ratio) will be 40%. Now, if the credit card issuer increases your credit card limit to Rs 1.50 lakh, your CUR will drop to 26.67%. Similarly, if you choose a new credit card with a limit of Rs 50,000, you will see the same impact on your CUR as it will drop to 26.67%.
2. Provides high capacity to withstand emergencies and financial crunch
The increased credit limit acts as a contingency fund during financial crunch or in case of financial emergencies like illness, job loss, disability, accident etc. A higher limit will allow you to easily meet the financial crunch by routing such unforeseen expenses through a credit card and, at the same time, keep your finances intact.
Individuals who do not have the ability to clear the outstanding credit card dues by the next due date can convert their entire credit card bill or a part thereof into credit card EMI. Note that credit card EMIs come with a repayment tenure ranging between 6 to 60 months, which enables cardholders to pay the outstanding amount in smaller chunks depending on their repayment capacity without hefty finance charges of 24-49% p.a. makes.
3. Gets you high loan amount in the form of loan against credit card
The increased credit limit also allows you to take a higher loan amount in the form of loan against credit card as these loans are usually sanctioned against one’s credit card limit. Such loans are pre-approved in nature and are offered only to select card users with excellent repayment records and credit profiles. Since these loans are pre-approved in nature, such loans get disbursed soon after application. This unique feature of instant loan disbursement makes loan against credit card an ideal financial instrument to meet financial crunch or exigencies.
The blocked credit card limit is released gradually when one repays his loan against the EMI of the credit card. The repayment tenure of such loans usually ranges from 6 to 60 months, while their interest rates are just slightly higher than the interest rates of personal loans. Remember, there are some credit card lending banks that offer a variant of loans in which the loan amount exceeds the available credit limit.
4. The possibility of spending more through merchant EMI offers has increased.
Many manufacturers and merchants offer EMI facility on their product at low interest amount if purchased through a particular credit card issuer. In addition, many such manufacturers/merchants also collaborate with credit card issuers to offer the option of no-cost EMIs on their goods and services, where the interest component of the EMI is met by the merchant and credited to the credit card holder. Just need to bear it. Some manufacturers/merchants also offer additional cashback or discount if the cardholder opts for no-cost EMI for a particular product/services, which helps in further reducing the purchase cost.
Thus, an increased limit will enhance your ability to buy more products/services through such merchant/manufacturer EMI offers, hence opting for a higher credit limit gives more room for your daily credit card spend.
How to increase credit card limit in India?
If you are looking for ways to increase your credit limit then here are 4 ways in which you can increase it.
Maintain a credit score of 750 and above
Credit score is a number that reflects the creditworthiness of an individual. Credit bureaus calculate credit score based on one’s past repayment history. Banks/Financial Institutions consider a score of 750 and above as good. People with a credit score below 750 generally have a poor loan management history. Since the credit limit is a pre-approved credit line, card issuers generally avoid increasing the credit limit for people with low scores.
Therefore, the initial step towards increasing your limit is to maintain or improve your credit score. The same can be done by reviewing your credit report at regular intervals. Regular review of your report will enable you to take necessary measures to build up your score and thus, clear one of the important eligibility criteria to be looked at by card issuers before increasing a candidate’s credit limit.
To continuously build or improve your score, pay your EMIs and credit card dues on time, avoid multiple applications for credit cards or loans within a short span of time and reduce your CUR (Credit Utilization Ratio) by 30% Keep it low
Wait to receive the credit limit increase offer
Most card issuers offer their card users a pre-approved credit limit increase based on their risk policy. Eligible candidates are informed through SMS, Email and Net Banking to increase the limit. Card users who wish to increase their limit can do so by accepting the offer within the period specified by their issuer. Such approvals are instant due to their pre-approved nature and do not require any documentation.
Request for increase in credit limit yourself
Card users may approach their own bank to request for limit enhancement. This is one of the easiest ways for people, especially those who are not getting pre-approved limit increase offers. Card users can submit the request by calling the bank’s customer care number, making the request through net banking or visiting the issuer’s branch.
Once your bank receives your card limit increase request, they will review your eligibility based on your monthly income, past repayment history, credit score, current employer etc. If all observations are positive, the issuer will accept your request for a limit increase.
Submit application for new credit card
If your current bank refuses to accept your credit limit enhancement request, you may consider applying for a new credit card. However, before submitting your application for a new credit card, be sure to review your credit report. This is because applicants with credit scores of 750 and above have an increased chance of card acceptance compared to those with lower scores. In addition, credit card issuers also consider your employer profile, monthly income, job profile, etc. while reviewing your card application. Thus, preferring to apply through the online financial marketplace instead of submitting the application directly on the issuer’s website. Such financial markets offer you multiple card options keeping in mind your credit score, job profile, monthly income, employer’s profile and other criteria.
Difference between total credit limit and available credit limit
Total credit limit is the maximum limit available for the card user to spend while available credit limit refers to the difference between the total credit limit and the amount spent by the cardholder through the credit card.
For example, if you have a credit card limit of Rs 2 lakh and you have spent Rs 80,000, then Rs 1.2 lakh will be the available credit limit, which is the amount available to spend through your credit card.
Frequently Asked Questions (FAQs) on Credit Card Limits
Question: How to increase the credit card limit?
Answer: Banks, from time to time, review your credit card usage, repayment pattern, credit score, etc. You will receive an offer to increase the credit limit through Call, SMS, Net Banking, Mail, if you qualify for their verification. You have to approve the credit limit enhancement proposal within the mentioned time frame to increase your credit limit. Those who are unable to increase their limit on their existing credit card can apply for a new credit card.
Question: Does the credit limit increase automatically?
Answer: Yes, most of the issuers send credit limit enhancement offers to their card users through SMS, net banking or mail. They can also inform the card user about the limit increase offer through a call. Such enhancement offers are based on the issuer’s periodic reviews that they perform on the card user. If their comments are positive, they offer their users the option to increase the credit limit on their existing credit cards.
Question: Should you accept the credit limit enhancement offer?
Ans: Yes, you should accept the credit limit enhancement offer as by doing so you will get better credit score, higher ability to face financial emergencies, higher loan amount through loan against credit card option and larger purchases through merchant To get benefits like EMI offer.
Question: Is it wrong to request for enhancement of credit limit?
Answer: No it is not, there may be times when your credit card issuer is not aware of your recent earnings growth, and because of this, it is not providing you the credit limit increase offer. On such occasions, you should contact the issuer directly to request an increase in the limit and submit your most recent income documents to proceed with your case.
Q: What are the implications of using more than the credit limit?
Answer: Using more than your credit limit not only incurs an over-limit charge of up to 2.5% of the over-limit amount, but it also negatively affects your credit score as exceeding the limit would mean 30 The %CUR mark has to be exceeded. Such a limit also nils the possibility of availing loan against credit card to meet financial emergencies.