How to Increase Credit Card Limit: Expectations vs. Reality
An increase in your credit limit provides a source of funds to be used during an emergency, or during times when you are facing a financial shortfall due to employment termination, medical issues, etc. However, it’s important to know about credit limits before getting into how they influence credit card use.
A credit limit is the maximum amount of funds you can spend through the use of a given credit card at any stipulated time. The limit is fixed before you get the card. Ideally, if you want to use your credit card wisely without the fear of overspending, you should use only 30% of your credit limit. Moreover, you should never exceed this limit.
This ensures that you’re never in debt and you maintain a good credit score by never defaulting on card payments. When a new card applicant wishes to get credit card approval, the credit card issuer (bank or NBFC) will typically sanction low credit limits. How to increase credit card limit may always be a consideration, but an increase in your credit limit means you have more to spend and consequently, run the risk of overspending.
Increases in the Credit Limit
Although card issuers offer cards with low credit limits to new customers, they are offered higher limits as their relationship with card issuing institutions progresses. Initially, card issuers are not sure of the repayment patterns of new cardholders.
The only way to be assured of a cardholder’s creditworthiness is to be patient and watch for income growth potential and the ability to make timely and full credit card bill payments. If you already have a bank account and have a credit card that you have used for a while, how to increase your credit card limit should not be an issue, as you may get offers of an increase automatically. In credit cards like the superior Bajaj Finserv RBL Bank Credit Card, credit limits are set according to your profile, and you are offered high credit limits when you begin your credit card journey.
Things to Consider
Increasing the credit limit on a card may seem like an exciting prospect as you may think you have more funds to spend. However positive your expectation of having a high credit limit may be, the reality of the situation may be entirely different.
Firstly, you should familiarize yourself with certain aspects of card limits. Once you know about your credit limit, you shouldn’t confuse it with the cash limit in credit card use. The cash limit in a credit card is the maximum amount of cash you can withdraw from an ATM using your card. This, like the credit limit, is fixed beforehand. Cash withdrawals have to be repaid as part of your credit card bill settlement.
Expectations vs. Reality
You may think of how to increase credit card limit and how it would be positive. You expect that an increase in your credit limit will have the obvious advantage of more cash flow through your card. However, there may be a disparity in your expected view and the ground reality of a high credit limit. It may not be the bed of roses you expect and you should consider the following:
- Your card issuer may offer an increase in your credit limit, but the increase may be small. The amount of increase depends largely on your credit score and your creditworthiness.
- You can increase your credit limit by using your credit card more and increasing its utilization ratio. If you use it for a plethora of payments and never default on settlements, you stand to gain a higher credit limit.
- While assessing your credit profile, credit agencies account for your credit utilization ratio. If the utilization ratio is above 30%, you are seen as credit-hungry and get a low credit score. This decreases your chances of getting a higher credit limit.
Spend within a Limit
With the Bajaj Finserv RBL Bank SuperCard, you get a card that comes with a high credit limit and can be used for multiple purposes. The card works as a cash card, loan card, EMI card, and credit card. That said, one should be prudent and judicious with their credit card usage. By following the guidelines mentioned above, you can ensure that your credit limit increases with time.