What is Credit Card Limit and How to Increase Your Credit Card’s Limit?
Credit card is a financial tool designed to assist cardholders to pay for goods and services without utilising their savings. It is one of the most preferred modes of alternate currency in the Indian financial market, with more than 44 million active credit cards in use across POS stations across the country.
Credit cards offer various features and conveniences that make them so useful in today’s economy. Cardholders borrow from a predetermined credit card limit and repay the amount within a billing cycle. Most financial institutions offer a substantial card limit, allowing an individual to cater to almost any financial requirements with the help of this financial tool.
What is a credit card’s limit?
A card’s limit is the maximum outstanding balance a cardholder can have at any point of time within a billing cycle. It is usually determined by the lending organisation when someone applies for a new credit card.
Lenders look at several parameters like an applicant’s income, existing debt, credit history, a fixed obligation to income ratio, etc. to determine a limit suitable for them. Managing expenses and staying well within the defined credit card limit is important both for building a good credit rating and avoiding debt.
Cardholders are allowed to make purchases reaching their card’s maximum credit limit. However, utilising the entire limit can negatively affect their credit score. Credit bureaus monitor both credit limit and card’s balance to calculate an individual’s financial information.
This aspect, known as the credit utilisation ratio, accounts for 40% of an individual’s credit score. A high credit utilisation ratio (50% or higher) shows that an individual is credit-dependent, which can reduce their credit rating.
Fortunately, most financial institution allows for increasing the credit limit if a borrower is responsible for his or her finances. There are several ways how one can improve the existing limit; let’s take a look.
- Maintain a good financial history – Credit card companies look for customers who maintain a good repayment schedule and no history of defaulting. Utilising a credit card for everyday expenses and repaying the debt within time will indicate that the user has good repayment capability and will be able to benefit from a higher credit card limit.
- Use it for foreign tours – Another useful method to increase credit limit automatically is to use it for overseas expenditure. Most credit card companies charge a markup fee of up to 3.5% on every overseas transaction. Using a card in foreign soil can show that the cardholder can benefit from a higher credit limit, and credit card companies can automatically increase the same.
- Apply for a new credit card – One can apply for a new credit card with a higher credit limit if their request to increase existing card’s limit is rejected. Financial institutions are likely to offer better limits with new cards as the applicant already has a credit history and is an existing customer.
There are several financial institutions that offer new cards with a substantial credit limit. RBL credit cards offered as RBL Bank SuperCard come with substantial credit limits along with various other features and benefits. These cards can be used as a standard credit card, loan card, EMI card, and cash card as per one’s requirement. Cardholders can also avail a personal loan on the unutilised credit limit and withdraw cash without any interest (for 50 days) using this credit card.
They also offer pre-approved offers on credit cards as well as several other financial products, including unsecured credits like personal loans and business loans, secured advances like home loans, etc. You can check your pre-approved offer by sharing only your name and contact details online.
- Request a limit increase – One of the most commonly used practices to increase the maximum limit on credit cards is to request an increase to the lending institution. Customers can also wait for an automatic revision of their credit limit. Most financial institutions revise their credit details every 6 months; building credibility, paying off card dues in time, etc. will likely prompt the lender to increase a customer’s credit limit.
Following the above-mentioned tips will help people increase their credit card limit and utilise it for their unique financial requirements.