A higher credit card limit can offer increased financial flexibility, improved purchasing power, and potential rewards advantages. While your bank or credit card company ultimately decides if your limit increases, you can improve your chances using thoughtful strategies. Let’s dive deeper into ways you can work towards achieving that higher limit in India.
What is a credit card limit?
Your credit card limit is the maximum you can charge to your card before needing to make a payment. Lenders set this limit using a combination of factors, with your credit history and income playing a primary role. Think of it as the amount of credit a lender is willing to extend based on your perceived ability to repay.
How to increase your credit card limit?
Here are actionable steps you can take to enhance your credit card eligibility:
- Build a strong credit history: Your credit score is arguably the most important factor impacting credit limit decisions. Make all credit card and loan payments on time, every time. Limit the number of new credit accounts you open to minimise hard inquiries on your credit report. Focus on using your credit responsibly over time.
- Maintain a low credit utilisation ratio: This ratio compares your outstanding credit card balance to your total available credit. Ideally, try to keep this ratio below 30%. That means if your cumulative credit limit is Rs. 100,000, aim to have an outstanding balance below Rs. 30,000. A low utilisation ratio indicates you manage your credit well and can handle a higher limit.
- Demonstrate financial stability: If you have gotten a raise, secured a side income, or found other ways to reliably increase your earnings, share this information with your card issuer. A verifiable rise in income bolsters your ability to pay back larger credit amounts.
- Reduce existing debts: Lenders look at your overall debt-to-income ratio. Prioritise paying down loans like student loans or other hefty credit card balances before seeking a limit increase. High existing debt might make lenders hesitant to extend additional credit.
- Request a limit increase:
Sometimes, the simplest approach is the best. You may be able to request a limit increase directly from your bank or credit card provider online or by phone. Be prepared to explain why you need a higher limit and be aware that banks will review your overall creditworthiness before deciding. If you are concerned about the possibility of your request being denied, consider using an online credit card EMI calculator to assess the feasibility of spreading your existing balance into manageable monthly installments. This can help you present a more informed and realistic plan to your bank, potentially increasing your chances of approval. - Wait for an automatic increase: Many card issuers periodically review accounts and may automatically raise your limit if you exhibit responsible credit usage and timely payments.
The importance of discipline
Increased credit limits bring both benefits and temptations. Use your additional spending power wisely. Don’t fall into the trap of overspending – even with a higher limit, aim to pay your statement balance in full each month and avoid accruing more debt than you can comfortably manage.
Bottom line
Building a solid credit profile takes effort and patience. Implement the tactics as discussed to improve your credit standing. Over time, responsible credit management habits and financial stability pave the way for higher credit card limits and greater financial flexibility.
