How to Increase Credit Card Limit

Credit card limit enhancement provides a wide range of benefits. It not just increases your access to instant credit but also assists in improving/building your credit score via reduced CUR (Credit Utilization Ratio). Moreover, it can even provide you with a higher loan amount through a loan against credit card option for dealing with financial exigencies or financial shortfalls.

While there are several benefits linked with credit limit enhancement, the question arises how to increase credit card limit? Here, in this article, we will see many aspects related to credit card limit and even explore ways on how to increase credit card limit?.

What is a Credit Card Limit?

Credit card limit refers to the maximum credit amount that an issuer extends to their credit card customers to spend using the credit card. Initially, credit card issuers sanction lower limits on credit cards to those who are 'new to credit' applicants. Later on, such cardholders are offered enhanced credit limits as their card issuers get the assurance of their income growth, better credit score and good repayment behaviour. Note that card users too can initiate the process of credit limit enhancements by directly communicating with their issuer and submitting the required documents.

How Do Banks Calculate Your Credit Card Limit?

Credit card issuers consider several factors to fix your credit card limit. They review your credit history, your credit score, your annual income, your employment status etc.

Benefits of Increasing Credit Card Limit

Besides contemplating the ways on how to increase credit limit? Individuals should first be well aware of the benefits linked with credit limit enhancement. Knowing their benefits is important because there are many credit cardholders who refuse the credit limit enhancement offer owing to the fear of getting trapped in a debt cycle caused by increased credit card spends. What such card users fail to understand is that it is not the enhanced limit but the tendency to spend more than one's repayment capacity, which makes them fall into a debt trap.

Here, we will list 4 benefits of enhancing your credit limit:

1. Ameliorates your credit score

For credit score calculation, credit bureaus basically factor in your CUR (credit utilization ratio). CUR is the share of the total credit limit utilized by you. Usually, banks consider a CUR of over 30% as a mark of credit hungriness, which means the individual with a CUR of over 30% is more prone to default as compared to those with lower CUR. Credit bureaus even lower your credit score if you continuously breach this mark of 30% for CUR. Thus, maintaining a CUR of below 30% is important for building and improving your credit score.

For those who constantly breach this limit of 30% CUR, one of the best ways to contain the CUR within the recommended limit is to accept the offer of credit limit enhancement from the existing card issuer or directly apply for limit enhancement on your own. Those who are not able to enjoy credit limit enhancement on their existing credit cards can apply for a new credit card from another credit card issuer.

For example, suppose you generally spend Rs 40,000 per month through your credit card, having a limit of Rs 1 lakh. Your CUR (credit utilization ratio) would be 40%. Now, if the credit card issuer increases your credit card limit to Rs 1.50 lakh, your CUR would fall to 26.67%. Similarly, if you opt for a new credit card with a limit of Rs 50,000, you will see the same impact on your CUR as it will fall down to 26.67%.

2. Renders higher ability to face emergencies and financial shortfalls

Enhanced credit limit acts like contingency fund in the course of financial shortfalls or in case of financial emergencies such as illness, job loss, disability, accident etc. A higher limit would permit you to easily meet financial shortfalls by routing such unforeseen spending via credit cards and, at the same time, would keep your liquidity intact.

Individuals lacking the potential to repay the credit card outstanding by the upcoming due date can even convert their whole credit card bill or a portion of it into credit card EMIs. Note that credit card EMIs come with a repayment tenure of between 6 and 60 months, which enables the cardholders to repay the outstanding dues/bill in smaller portions depending on their repayment capacity/potential without incurring heavy finance charges of between 24-49% p.a.

3. Fetches you higher loan amount in the form of loan against credit card

Increased limit even allows you to take up higher loan amounts in the form of a loan against a credit card because these loans are usually sanctioned against one's credit card limit. Such loans are pre-approved in nature and are offered just to select card users with excellent repayment records and credit profiles. As these loans are pre-approved in nature, such loans are disbursed on the same day of the loan application. This specific feature of instant loan disbursal makes a loan against a credit card an ideal financial instrument to face financial shortages or exigencies.

The blocked credit card limit is released gradually as and when one repays their loan against the credit card's EMI. Repayment tenure of such loans generally ranges from 6 to 60 months, while their rate of interest is just a notch higher as compared to interest rates of personal loans. Remember, there are few credit card issuers who provide a variant of such loans wherein the loan amount is over & above the available credit limit.

4. Increased scope for making big-ticket spending via merchant EMI offers.

Many manufacturers and merchants provide the EMI facility at a reduced interest amount on their product/services if bought via a particular credit card issuer. Moreover, many such manufacturers/merchants even collaborate with the credit card issuers for offering the option of no-cost EMI on their goods and services where the EMI's interest component is met by the merchant/manufacture and the credit card holder only need to bear the buying cost in the form of EMIs and the GST amount incurred on the interest component. Few of the manufacturers/merchants even provide additional cashback or discount if the cardholder opts for the no-cost EMI option for particular product/services, which helps in further reducing the purchasing cost.

Thus, an enhanced limit will increase your potential to purchase more products/services via such merchant/manufacturer EMI offers. As unpaid card EMIs block your credit card limit until their repayments, opting for a higher limit helps at keeping more room for your day to day credit card spends.

How to Increase Credit Card Limit in India?

If you are one of those searching for ways as to how to increase your credit limit?. Here are 4 ways you can get it done.

1. Ensure to have a credit score of 750 and above

Credit score is a number that portray an individual's creditworthiness. Credit bureaus tend to calculate the credit score based on one's past repayment history. Banks/financial institutions consider a score of 750 and above as good. Those with below 750 credit score generally have poor debt management history. As credit limit is a pre sanctioned credit line, card issuers usually desist in enhancing the credit limit of those with low scores.

Hence, the initial step towards enhancing your limit is to maintain or improve your credit score. The same can be done by reviewing your credit report at regular intervals. A regular review of your report will enable you to take the required measures to build your score and, thus, clear one of the crucial eligibility criteria looked upon by the card issuers before enhancing the candidate's credit limit.

For steadily building or improving your score, make sure to timely repay your EMIs and outstanding dues of credit cards, avoid multiple applications for credit cards or loans within a short time span and keep your CUR (credit utilization ratio) under 30%.

2. Wait to receive the credit limit increment offer.

Most of the card issuers offer a pre-approved credit limit enhancement offer to their card users based on their risk policy. Eligible candidates for limit enhancement are informed through SMS, email, and net banking. Those card users wishing to enhance their limit can do so by accepting the offer by their issuer within the mentioned period. Such approvals owing to their pre-approved nature, are instant and do not need any documentation.

3. Request for the credit limit enhancement by yourself

Card users can, on their own, approach their issuer to request limit enhancement. This is one of the easiest ways for those wondering - how to increase the credit card limit? Particularly for those not receiving pre-approved limit enhancement offers. Card users can submit enhancement requests by calling the issuer's customer care number, placing requests via net banking or visiting the issuer's branch physically.

Once your card issuer receives your limit enhancement request, they will review your eligibility based on your monthly income, past repayment history, credit score, current employer etc. If all the observations are positive, then the issuer will accept your request for limit enhancement.

4. Submit an application for a new credit card

If your current issuer refuses to accept your credit limit enhancement request, then you can consider applying for a new credit card. However, before submitting your application for a new credit card, ensure to review your credit report. It is because those applicants with 750 and above credit scores have increased chances of card approval as compared to those with lower scores. Moreover, credit card issuers even consider your employer profile, monthly income, job profile etc., while reviewing your card application. Thus, prefer to apply via online financial marketplaces in place of submitting a direct application on the issuer's website. Such financial marketplaces get you several card options in consideration of your credit score, job profile, monthly income, employer's profile and other criteria.

Difference Between Total Credit Limit and Available Credit Limit

Total credit limit/credit limit is the maximum limit available to the card user to spend, while available credit limit refers to the difference between the total credit limit and the amount the cardholder has spent through the credit card.

For instance, if you have a credit card limit of Rs 2 lakh and you spent Rs 80,000, then Rs 1.2 lakh will be the available credit limit, which is an amount available to you for spending through your credit card.

Frequently Asked Questions (FAQs)

✅How to increase credit card limit?

Issuers, on a periodic basis, review your credit card usage, repayment pattern, credit score etc. If you qualify for their verification, you will receive a credit limit enhancement offer through call, SMS, net banking, mail. You must approve the credit limit enhancement offer within the mentioned timeline for getting your credit limit enhanced. Also, you can get your limit enhanced by directly contacting the issuer for the enhancement. Those unable to get their limit enhanced on their existing credit card can apply for a new credit card.

✅Does the credit limit increase automatically?

Yes, most issuers send credit limit enhancement offers to their card users through SMS, net banking or mail. They may even inform the card user about the limit enhancement offer through a call. Such enhancement offers are based on the issuer's periodical reviews that they make on the card user. If their observations are positive, they offer their users the option of credit limit enhancement on their existing credit card.

✅Should you accept the credit limit enhancement offer?

Yes, you should accept the credit limit enhancement offer as doing so renders you with benefits like improved credit score, high potential to face financial emergencies, higher loan amount through a loan against credit card option and higher scope for conducting big-ticket purchases through merchant EMI offers.

✅Is it bad to request a credit limit increase?

No, it is not. At times your credit card issuer may not be aware of your recent income increment, and owing to this, it may not be providing you with a credit limit enhancement offer. On such occasions, you should yourself directly contact the issuer to place a request for limit enhancement and submit your recent income documents to push your case forward.

✅What is the impact of going over the limit?

Using more than your credit limit not just triggers an over-limit charge of up to 2.5% of the over-limit amount but it even affects your credit score negatively as going over the limit means exceeding the 30% CUR mark. Such limit breaches even zeros your chances of opting for a loan against a credit card to meet financial emergencies