While it is true that credit cards offer an instant source of debt, there is a limit to how much you can borrow at any given time. Known as the credit card limit, this is the maximum amount of credit you have access to with the credit card. You may benefit from a credit limit increase in many ways.
Here are some reasons to seek a higher credit card limit
Credit score improvement
CIBIL, the primary credit bureau in India, puts strong weightage on the credit-utilisation ratio of individuals. If your card expenses exceed 50% of your credit limit, it will adversely affect your CIBIL scores as you will be deemed a credit-hungry borrower. Now, with a higher credit card limit, assuming your expenses remain the same, you can effectively restrict the credit utilisation below 40%, thereby improving credit score.
Better rewards and discounts
Many card issuers waive off annual fees related to the card upon spending a certain amount using the card within a year. Additionally, doing so also allows you to utilise discounts and cashback plans as well. A higher credit limit will allow you to spend more time with the card. However, note that you need to repay the credit availed before the due date. When you apply for credit cards, ensure you check these factors and opt for a higher credit limit to take advantage of them.
Handling financial emergencies
When you avail a card with a high credit card limit, you can secure yourself against emergencies. For instance, a card with a higher limit can help you make emergency travel arrangements, which is not always possible if the limit is too low to secure flight tickets and book hotel rooms.
Loan against cards
When you opt for a loan against your card, the financing company offers you the loan against the credit limit for the card. A higher limit results in a more substantial loan amount, and vice versa. Some reputed cards, such as the Bajaj Finserv Credit Card, allow you to break the loan repayment into EMIs and reduce financial burden.
How can you opt for a better credit card limit on your card?
Follow the tips mentioned below to increase your credit card limit and enjoy higher expenses through the card.
- Repay your debts without fail- The only way to increase opt for cards with a higher credit limit is to increase your credit score. If you have an existing credit card, repay the bills of the same on time and in full. Similarly, if you have outstanding debt, ensure you pay EMIs regularly.
- Opt for secured credit cards- In case of secured cards, the credit is offered against the price of an asset you pledge. If you pledge an additional asset for the card, you can ask the financing company to increase the credit card limit accordingly.
- Credit increase against spotless repayment history- If you have managed to use the credit card effectively and pay the bills on time, you can request the card issuer to increase the limit based on your repayment history. With a proven record of repayment, NBFCs are more likely to offer a higher credit limit.
- Increase of income- If you are able to increase your monthly income, you can opt for an increase of the credit limit. Ask the credit card company to consider your new monthly earnings and offer a credit limit based on the same.
The pointers mentioned above are simple steps one can follow to increase their chances of securing a card with a higher credit limit.
Maintain your credit score and you can apply for credit cards with a higher credit limit. If you do not have a credit history, opting for a secured card is a wise move.