In this post, we will discuss how to increase credit card limit and give some smart tips to increase the same. Credit Card has become an important instrument in our life. It makes our life easier until we use it within the available limit. We use credit card for making online payments, shopping and paying bills. However, we can’t use credit card beyond a certain credit limit in a month. If we use card beyond credit limit, we have to pay the over limit fee or penalty charged by credit card companies.
However, we can increase the card limit using some simple ways. You can do so either before or after apply for a new credit card.
Before proceeding we must know about what is credit card limit.
What is Credit Card Limit?
Credit Card Limit is the maximum limit up to which a credit card user is authorized to spend on his/her credit card. The limit is decided by credit card issuer companies. Before giving approval, lender checks your financial history, repayment capacity, then decide your credit card limit. Some other factors like your monthly income, age, other loans or liabilities, credit score are also considered before final approval.
You can check your credit card limit either online or in monthly statements.
What is Total credit limit and available credit limit?
Total credit limit is the maximum limit on credit card decided by bank as we discussed above. Once you cross that limit, bank will charge your card with over limit fee.
However, available credit limit is the total credit limit minus your spending on credit card in that particular period. For example, suppose your total credit limit is 100000/- and you spent 25000 already. Then your available credit limit for that period will be 75000/-.
How to increase credit card limit?
Here are some tips following which you can increase your credit card limit –
Submit application for Credit Card limit Increase
It is possible to get increase in credit limit on existing card just by submitting an application. However, approval for the same depends on various factors like credit history, credit score, income and any other liabilities. While you do this, avoid making application for other credit card, as it will hurt your credit score. You can submit request for credit card limit increase either online through internet banking or through personal visit.
Use Credit Card Regularly
In order to convince credit card companies to consider you to increase credit card limit, use credit card regularly and make timely repayment. It can help you to get increased credit limit on your credit card. Credit card issuer companies regularly checks for good credit card user with good track record. If they find you, may offer you increased credit card limit.
Improve credit score
Good credit score lead to higher credit limit, you must try to improve your credit score. A healthy credit score shows that you never defaulted in repayment and paid monthly bills on time. With a high credit score, you can request for increased credit limit on your credit card.
Show increase in income proof
Your salary or earning potential is the most important factor which is considered to decide your credit limit. If your salary is increased or there is another source of income, submit it with credit card companies and claim increase credit limit. Increase in salary mean you are eligible for increase in credit card limit.
Apply for a new credit card
If you have credit card with low limit and are repaying bills on time. You can submit your application for a new credit card with higher credit limit. The bank or credit card companies will definitely consider your application seeing your repayment history.
Benefits of Increase in Credit Card Limit
Now you know how you can easily increase credit limit on your credit card. However, before submitting request for credit limit increase, you must assess whether it is good or bad for you. With increased credit limit, you can explore following benefits –
Helps in low credit utilization ratio
As you know credit utilization ratio is indirectly proportional to total credit limit. Higher credit limit leads to low utilization rate which helps to improve your credit score.
Helps in emergency need of money
A higher credit limit gives access to fund during a financial or health emergency.
More Spending Capacity
It is obvious that with increase credit limit, your spending capacity is increased. You can use your credit card for large purchase when your does not want to spend the cash. You can make the entire purchase using credit card without any need to apply for a new loan or credit.
Rewards and Perks
With higher credit limit card, you can unlock various perks and rewards like airport lounge access, higher reward points, cash back etc.
FAQs on Increase in Card Limit
What is total credit limit on credit card?
It is the maximum limit you are authorized to use on credit card.
Can I spend beyond total credit limit?
What happen if I spend beyond total credit limit?
You will be charged with over limit fee or penalty.
How much time it take to get increase in credit limit?
Once you submit the request with relevant documents, it will take few days. However, it may differ from bank to bank.
How increased credit limit affect credit score?
Increase in credit limit helps in low credit utilization ratio thereby improving the credit score.
What could be the reason for denial of credit limit increase?
There may be many factors like low income, default in repayment, bad credit score, high utilization rate etc.