Credit Card Limit: Credit Card has become a very important instrument in our daily lives. It makes our lives so easier until we use it within the available limit. We all use cards for making online payments, shopping, and also paying bills.
But, we can’t use a card beyond a specific limit in a month. We have to pay the over-limit fee or penalty charged by credit card if we choose to use a card beyond the credit limit.
However, we can increase the card limit using some very simple ways. Which is either before or after applying for a new credit card. But before we continue we need to know what a Credit Card Limit is
What is Credit Card Limit?
Credit Card Limit is the maximum outstanding balance you can have on a card or line of credit without being penalized. It is the maximum limit to which a credit card user is authorized to spend on his/ her credit card.
However, the limit is decided by the card issuer companies. It is very important to manage your credit limit to stay out of debt and build a good score. Meanwhile, before giving your approval, the lender checks your financial history, and repayment capacity, and decides your credit card limit.
Also, some other factors like your monthly income, loans or liabilities, and age including your credit score are also considered before final approval.
What are the Total Limit and Available Limit?
The total limit is the maximum limit on the card which is decided by the bank as I said earlier. the bank will charge your card with an over-limit fee once you cross that limit.
The available credit limit is the total credit limit minus your spending on the card in that exact period. For instance, if your total credit limit is 100000/. and you spent 25000 already. Then your available credit limit for that particular period will be 75000/.
Benefits of Card Limit
Increasing your credit limit is just an opportunity to spend beyond your means. It doesn’t have to, rather increasing your credit limit can have a number of upsides if you manage your credit well. A higher credit limit can boost your credit score. Below are some benefits of increasing your credit limit:
- Lowers Your Card Utilization
The FICO credit-scoring model will ding your credit if the amount of credit you have used is close to the total amount of the credit available to you. Increasing your credit limit will reduce the percentage of the funds used. Lower the credit utilization ratio and also improve your credit score.
- Cheaper and Easier to Get Loans and Additional Credit
Another benefit is this, if your credit score is higher, you will have a better opportunity in the nearer future of getting approved for a credit card, mortgage, or even car loan. You will also have a better opportunity of getting a lower interest rate. Since your credit score will know if you will be given the best available rate or higher, the risk-adjusted rate
- Helps in an Emergency
Also having a credit limit well in excess of your normal spending amount gives you a resource if you have a resealable emergency that you can’t pay for with cash.
- Rewards and Perks
You can unlock different perks and rewards like airport lounge access, with a higher limit card. But if you have never carried a card balance, paying for recurring expenses on your credit cards will not cost you anything and can help you earn more rewards.
- Lets You Make Huge Purchases Efficiently
You know already that using your card to pay for large purchases is okay and can help you get rewards. What you may not know is your card will most likely include a number of consumer protections that can come to your rescue if there is a problem with your purchase.
How to Increase Card Limit
Below are some tips which can easily increase your credit limit
- Submit an application for a card limit increase
You can submit a request for a card limit increase either online or through internet banking or even visit the bank. But while submitting an application. Make sure you avoid making applications for other credit cards because it will hurt your credit score.
- Use Your Card Daily
For you to be considered to get a card limit, use your card daily and make timely repayment. this will help you get an increased credit limit on your credit card.
- Improve credit score
This also is another tip that will help. You must try to improve your credit score because a good credit score leads to a higher credit limit. You can request an increased limit on your card with a high score.
- Show increased income proof
Your salary or earning potential is an important factor that should be considered to deciding your credit limit. Increasing in salary simply means you are eligible for an increase in card limit