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How to Increase Your Credit Card Limit? Research Team | Posted On Monday, November 04,2019, 03:00 PM

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How to Increase Your Credit Card Limit?



Since credit cards are an inherent part of our lives today, credit limits are the most important aspect credit cardholders should be enlightened upon. Credit limits can be confusing and People often do not take credit limit seriously and land up in trouble with their credit score. If you have a lower credit limit, then instead of spending above your credit utilization ratio, you can opt for a higher credit limit and save yourself from debt or bad credit score.

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What is a Credit Limit?

As the name suggests, the credit limit is the limit up to which you can make purchases on your credit card. The purchase limit is set by the bank that issues the credit card by evaluating your credit score and repayment history. Therefore, the credit limit varies depending on the card type and the eligibility of the customer. Applicants who have no credit history are likely to get lower credit limit on their credit cards as the issuing bank is unsure about their repayment capacity.

How do Banks Determine Your Credit Card Limit?

When banks receive a credit card application, they determine your eligibility through multiple factors that include:

  • The applicants family income
  • Age of the applicant
  • Current debt
  • The  number of past credits
  • Income and employment status
  • Repayment history and credit score

See Also: How to Apply for Credit Cards Online?

How to Increase Your Credit Card Limit?

  • Apply for a New Credit Card: As your income increases, you can opt for credit cards other than your existing card. You can choose from a variety of options preferable the ones that provide you with additional benefits. If you have been managing your existing credit card well then there are chances that you will receive a second card with a higher credit limit.
  • Request to Increase the Limit on Your Existing Card: Banks often increase credit card limits of the existing card. Low credit card limit does not remain forever. If you use your credit card often and repay the full amount on or before the billing cycle, then your bank will give you the option to increase your credit limit. You can initiate a request and your bank will increase your credit limit after verifying your current credit score and repayment history.
  • Annual Increase: Most of the banks upgrade the credit limit on existing credit cards annually provided you have to maintain a good credit score and have paid your dues on time. Sometimes banks offer an annual increase in credit limit and sometimes you have to initiate a request. The annual increase in credit limits are also accompanied by other offers like additional rewards and discounts. Even if you don’t need a hike on your credit limit it is good to have a high limit as you never know when it might come handy. 
  • Improved Credit Score: Credit score is one of the main factors considered by banks while setting your credit limit. Keep your expenses within your credit limit and pay all your dues/EMIs on time. This way you can maintain a good credit score that will eventually help you to secure an upgraded credit limit.

See Also: Low Income? Here are Some Credit Card Tips For You!

Benefits of Increasing Your Credit Limit:

Increasing your credit card limit allows you to access some added benefits on your credit card. You will be a part of the privileges and rewards program that were previously excluded. Listed-below are some of the benefits that will help you understand the privileges you can enjoy on an upgraded credit card:

Lowers Your Credit Utilization Ratio:

As a credit card user you must already be aware of the importance of the credit utilization ratio. A higher credit limit helps you to maintain a low credit utilization ratio and thus results in a better credit score. Suppose you have a credit utilization ratio of Rs. 1 lakh, you can conveniently be within 30% your credit limit. However, if your credit limit is lower say 50,000 then 30% of the credit limit means Rs. 15,000. Hence it is sometimes possible that you may end up spending more when you have a lower credit limit.

See Also: The Beginners Guide to Credit Cards

Helps in Availing Loans:

When you have a high credit limit and you do not spend more than 30% of the limit then financial institutions believe you are not credit hungry and know how to manage your finances well. Thus getting an approval on your loan application becomes easier.

Helps During an Emergency:

A higher credit limit means it acts as an additional source of managing your expenditures during financial or medical emergencies. You can make some basic hospital payments in case of medical emergencies through your credit card and repay later.

See Also: Low Income? Here are Some Credit Card Tips For You!

Access to Perks:

Credit cards with higher credit limit come with additional benefits. It offers you benefits like access to airport lounges, free memberships at clubs or hotels, discounts on selected merchandise outlets etc.

Now that you know the benefits of higher credit limit you can decide for yourself whether to opt for an upgraded credit card or not and what are the factors that help you access an upgraded credit card.

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