Embarking on a journey to grasp the nuances of your credit card limit? You're in the right place. In this comprehensive guide, we will delve into the intricacies of credit card limits and, more importantly, demystify the process of how to increase credit card limit.
Whether you're aiming to expand your purchasing power or seeking financial flexibility, understanding the factors influencing your credit limit is key. Join us as we explore actionable strategies and tips on how to increase your credit card limit, empowering you to take control of your financial capabilities.
A credit limit is a cap set by banks on the amount of money that you can spend. Once you reach the maximum credit limit your card allows, you won’t be able to use your card until all outstanding dues are cleared.
Certain credit card issuers allow you to use your credit card beyond the credit limit. However, doing so will result in the levy of a penalty known as the ‘over-limit fee’ which may result in you incurring additional fees on your spending.
Assume that you’ve applied for a credit card with a bank; after assessing your application and a multitude of factors, the bank approves your application for a credit card with a limit of ₹2 lakhs. By the end of the first month, you spend about ₹1.8 lakhs on your credit card, leaving you with an available credit card limit of just ₹20,000.
Now, let’s say that you wish to use your credit card again for purchases over the amount of ₹20,000. What do you do? Depending on the card issuer, such transactions will be declined or you will be charged an over-limit fee and interest.
However, if you were to clear the outstanding dues of ₹1.8 lakhs, your credit limit would be restored to ₹2 lakhs, enabling you to use your card normally without incurring any penalties.
The credit limit is decided entirely by the credit card issuing company. This decision is made based on certain factors, let's dive into the most important ones.
This is arguably one of the most critical factors that determines your credit card limit. The higher your credit score, the higher your credit limit is likely to be. Card issuers tend to view individuals with a high credit score more favourably.
Your income is another major factor that's taken into consideration by card issuers. Usually, issuing companies set a percentage of your annual income as the maximum credit card limit. Therefore, the higher your income, the higher your credit limit.
The number of debt obligations that you have currently can also play a huge role in determining your credit limit. The more debt you have, the lower the card limit is likely to be. So, even if your income levels are high, you may still have a low credit limit if your debt obligations are too high.
Although a minor factor, your age is also taken into consideration by card issuers when setting your credit card limit. Younger individuals usually tend to get higher credit limits than older individuals.
Fi’s got you covered! You can easily check your credit limit of your Fi-Federal Credit Card anytime by heading over to your credit card console on the Fi app. The limit will also be displayed to you when you first apply for your credit card.
Fortunately, your credit card limit is not permanent. Your card issuer may periodically increase your card limit based on your usage and repayment pattern.
Alternatively, if your income levels have increased since you first got your card, you can submit your income statement to the bank with a credit card limit increase application.
One of the easiest ways to increase your credit card limit is to place a formal request for the same with the issuing bank. If you do place such a request, the bank will take into account various factors like your credit score, your repayment history and your income before deciding whether you are eligible for an increase in your credit limit.
That said, it also helps you have a long-standing relationship with the bank, because they will have historical data to rely on. So, if you check all these boxes, it doesn’t hurt to first directly reach out to your bank and place a request for a higher credit limit.
From time to time, many banks and financial institutions have offers and deals on their credit cards. You may even get calls from the sales teams at different banks, informing you that you are eligible for their credit cards. One of the best ways to increase your credit limit is to simply take advantage of these offers and get a new credit card that has a higher credit limit than your existing card.
Occasionally, some banks may issue credit cards that have a clause for an annual increase in the credit limit. Of course, this will depend on various factors. You should have paid your existing dues on time. And you should have a healthy credit history. If you meet the criteria set by the bank, you may be eligible for an annual increase in your credit card limit.
Check with your issuing bank if you qualify for this feature, and if you do not need the increased credit limit right away, make sure you avail this benefit. In most cases, a higher credit limit also comes with better credit card rewards. Importantly, you can never predict when a higher credit limit may be useful.
Another easy technique with which you can increase your credit card limit is by offering your bank some incentive to permit the higher credit limit. A proof of increase in income is one of your best bets in this context because it shows the bank that you can financially sustain a higher liability.
Your bank may not be aware of a pay hike you received at work or about a new job that now offers you higher pay. Letting your bank know of this, could
Lastly, make sure you pay your credit card dues on time. This is because prompt payment will have a positive impact on your credit score and your credit history. And irrespective of which method you choose to request for an increase on your current credit card or to get a new card, your credit score plays an important role in determining your credit limit.
In case of a poor credit score, your existing banker may not be willing to increase your credit limit. Alternatively, you may not qualify for any new credit card either, making it hard to obtain a higher overall spending limit.
A question you may have is if it is advisable to use up your entire credit card limit.
One of the primary factors considered when determining your credit score is your credit utilisation ratio. This financial metric tells you just how much of your credit you’ve utilised as opposed to the total available credit card limit.
A credit utilisation ratio of more than 35% can reduce your credit score. This means that if your credit utilisation ratio is 100%, it can lower your credit score.
In conclusion, understanding credit card limits is essential before applying for a credit card. Factors such as credit score, income level, debt obligations, and age influence the credit limit set by card issuers. While it is possible to increase the limit over time, it is advisable to maintain a low credit utilisation ratio to preserve a healthy credit score.
If you're looking for a credit card that is all about the rewards, try the Fi-Federal Credit Card.
Fortunately, there are multiple through which you can find out what the credit card limit for your card is. Either you can look at the welcome kit the card arrived in. It usually contains information regarding your credit card, including the maximum limit. Alternatively, you can log into your credit card account to check your limit. Or, you can get in touch with the customer care of the card issuing company.
Yes, of course. If your income has recently increased, you can increase your credit limit by submitting your latest income statement with the card issuing bank. Alternatively, you can also apply for a new credit card to increase your maximum credit card limit.
Yes, the over limit fee can be waived off in credit cards. You'd need to speak with your bank and ensure you don't get charged for crossing credit limit, and instead your card doesn't go through with transactions once you cross the card limit.
The best way to do this is by not overspending and clearing your dues in full. But if you have a habit of overspending on your credit card, you could get in touch with your bank and ask them to remove the over limit fee. Instead, they can stop transactions through your card if you cross the card limit.
The credit card limit matters because it is the maximum amount you can spend on your card. Also, the higher the credit limit, the more your spending capacity. A higher credit card limit also makes it easy for you to lower your credit utilization ratio, which, in turn, positively impacts your credit score.
The maximum credit card limit is the highest amount that you can spend on your credit card. You cannot spend more than the maximum limit specified on your credit card. That said, it is always advisable to limit your credit utilization to around 30% of your credit limit. So, for instance, if your credit card limit is Rs. 1 lakh, you can try and keep your credit usage in the range of ₹30,000 or so.
If you are wondering how to increase your credit card limit, there are many tips that you can use to achieve this purpose. Some of the top ideas that work include requesting for an increase in the limit on your existing card, applying for a new card, and improving your credit score by paying your bills on time.
If you have a good credit score, you could start upgrading your card limit as early as within 3-6 months of credit card usage.
If you are good at staying within your budget and don't overspend, increasing your credit limit is actually a good idea. This way you can keep your credit utilization in control and boost your credit score.