Today, having a credit card is helpful, and the majority of us use them to shop and pay our expenses. Many consumers prefer credit cards with large limits since more than 60 million Indians are dependent on credit cards to shop and pay their expenses. But we are always restricted by the credit limit, which stops us from going above a certain amount in a given month. Here are several easy ways to increase limit on your credit card as well as how banks determine your limit.
What is a Credit Card Limit?
A credit card limit is a limit imposed by financial institutions on a customer’s credit card. You are not permitted to spend more than your credit card’s authorized limit of Rs. 1,00,000. Before authorizing a consumer for a credit card, the bank determines or sets the credit limit. Some clothes crucial variables are also determined by the eligibility of a consumer.
Credit Limit: How Banks Determine it?
It is a general awareness that credit card limits are determined by an individual’s creditworthiness. When you apply for a credit card, banks and other financial organizations use a credit score to determine your credit limit. They will also look at your income, job position, spending patterns, age, current debt, payment history, and credit history.
Many financial organizations provide credit cards with specified limitations. For example, if a bank offers a card with a limit of Rs. 2,00,000, the set limit applies to everyone who uses that product. Other institutions may not have this choice and may undertake thorough consumer research before issuing a card with a greater limit.
However, if you’re new to credit and do not have a credit score, you may be allowed a reduced credit limit. This is where banks build trust in new consumers and watch their shopping and payment habits. If everything goes well and you pay your bills on time, your credit limit will steadily rise.
How you can Increase Your Credit Card Limit
There are several strategies to increase your credit limit and make it more profitable for you. It takes some planning, patience, and financial control.
Let’s look at some of your alternatives.
Pay off your existing debts:
Pay off your existing house or personal loan before requesting an increase in your credit limit from your bank (any loan). More debt indicates a lower chance of increasing your credit limit.
Don’t go above your credit limit:
Don’t waste your entire income. A credit card is a need that will be helpful in an emergency. Spending up to 30% to 40% of your credit limit is recommended since it shows that you are not dependent on your credit card to maintain your spending. Spending less allows you to simply pay off your debts and improve your credit score.
Display proof of your income:
Your income is the most essential element in determining your credit card limit. Providing updated income proof enables you to obtain the appropriate credit limit from banks. In most circumstances, banks don’t make a special effort to raise credit limits for existing customers. Your chances of receiving greater limits will rise if you submit your payslip and update your account details with the bank.
Read More: How a New Credit Card Affects Your Credit Score
Conclusion
Credit cards are similar to emergency savings accounts that should not be missed. It’s advisable to use your credit card just for necessities like electricity, bills, and other needs. Your Credit Utilization Ratio should always be as low as possible, maintain a decent credit score, never miss a payment date and avoid applying for too many credit cards. It’s important to be aware of your own spending habits, to identify situations when you feel pressured to spend more and to remind yourself of a question just before you make a purchase
