Your credit card comes with a predefined credit limit determined based on your income and credit score. You can use your credit card limit to purchase goods and services. At times, your credit limit is not enough to make a large purchase. You will have to increase your credit limit to be able to make transactions beyond the set limit. However, it is worth noting that increasing our credit limit can land you in a debt trap.
Before learning how to increase credit card limit, it is imperative to know what is a credit limit and why it matters?
Your credit card limit is the maximum amount of money that you can spend using your credit card. It can start from a few thousand rupees and can go up to lakhs, depending on the type of credit card you choose and your credit score. The benefit of having a higher credit limit is that you have a bigger purchasing power, which can come in handy during emergencies.
How to increase a credit card limit?
Apply for a new credit card
The easiest way to increase your credit limit is to apply for a new credit card with a higher credit limit. The credit limit varies across different credit cards in India. When you apply for a new credit card, your credit limit automatically increases. However, it is worth noting that the higher your credit limit, the higher your debt will be.
You can apply for a new credit card through your current credit card issuer or visit another issuer. Compare different credit cards and choose one that offers the highest credit limit. If you have paid your credit card bills on time, you can qualify for a credit card with a higher credit card limit.
Request your credit card issuer to increase your credit card limit
Another way you can increase your credit card limit is if you request your credit card issuer. You will need to contact your credit card office and state your request. However, remember that your credit card issuer is at sole discretion to approve or reject your request to increase your credit limit.
Before approving your request, your credit card issuer considers several factors, such as credit history, credit score, card usage, bill payment records, income, etc to determine whether or not to increase your credit card limit.
Convince your issuing bank that you are a responsible borrower
It is essential to convince your issuing bank that you are a responsible borrower. You must show your card issuer that you have been paying your credit card bills on time, and you have cleared all pending bills. If you want to increase your credit limit in the future, you do not just pay the minimum amount due, but clear all bills in full. It indicates that you do not keep arrears on your bill payments.
Show proof of increase in income
Credit card issuers increase the credit limit of borrowers with a higher income. If you have recently received a promotion or a salary increment, make sure to inform your credit card issuer about it. You will have to submit documents supporting the increase in your income.
Invest with the issuing bank
Your bank may offer to increase your credit limit if you invest with the bank, such as opening a fixed deposit account. On the other hand, it can significantly help if you consolidate all your banking accounts into one account as it allows banks to have a better picture of your financial standing.
Improve your credit score
Besides your income, your credit score is another crucial factor considered by your lender to determine your credit card limit. If your credit score is greater than 750, it shows that you are a responsible borrower and will be able to pay your credit card bills. Having a higher credit score enables you to get a higher credit limit.
Keep a low credit utilization ratio
Whether your credit card issuer approves your request for an increase in credit limit depends on your credit utilization. Your credit utilization ratio indicates the credit you are using against the total credit limit you have. Usually, banks recommend that you keep your credit utilization ratio below 30% to keep your credit score healthy. Having a low credit utilization ratio indicates that you do not credit hungry, and it boosts your credit score substantially, which helps you get a higher credit limit.
So, if you are wondering how to increase your credit score, pay heed to the above-said tips and enjoy the benefits.