Tips To Increase Your Credit Card Limit

A credit card is a great financial tool that offers you many benefits. Apart from helping you with the extra finance, when used correctly, credit cards offer you rewards, protection and convenience. But the only thing about credit cards is its limit. You have to be very cautious to not exceed 30% of your credit limit, in order to maintain a good credit score. As such, it is beneficial to have a high credit limit.
 
Here are a few simple steps that can help you increase your credit limit.
 

How do lenders decide on the credit card limit?

Credit cards are an example of a revolving loan. It has a predetermined limit, and once you pay for the amount consumed, it is restored to full. Like any other financial products in the market, the maximum limit of your credit card is also determined by your credit behaviour. The lender considers the following variables during the appraisal process. 
 

• Monthly income
• Employment status
• Credit history
• Work experience 

 

What are the benefits of increasing your credit card limit?

 

• Lowers utilisation rate

  According to the credit bureaus, exhausting over 30% of your credit card balance lowers your credit score. If you have a habit of swiping your card for every small purchase, such as groceries, shopping, or dining, increasing the limit will help you maintain your creditworthiness.
   

• Improves borrowing capacity

  Credit cards contribute significantly to your credit score. Increasing your limit while keeping utilisation below 30% improves your borrowing capacity. Hence, if you intend to obtain a home loan or mortgage loan against property, this should be one of your many moves. 
   

• Emergency cushion

  An emergency, such as a medical crisis or job loss, can happen to anyone at any time. If you do not have sufficient funds at the time, the situation will worsen. At that time, a credit card comes to the rescue because it provides flexibility in terms of usage.
   

• Additional perks

  Having a higher credit card entitles you to various benefits. For example, you may be able to get a discount on fuel, shop from specific brands, or even on utility bill payments. 
   

What factors should I consider before requesting a credit card limit increase?

 
Increasing your card limit requires careful consideration of the following parameters. 
 

1. Improve your credit score

   Never expect your lender to raise your total limit if you have a poor credit score. A credit score reflects your repayment potential and informs lenders about your previous debt clearance. A low credit score indicates missed EMIs, past defaults, loan settlement on a lower amount than you actually owe, and credit-hungry behaviour.
    
   You can boost your creditworthiness by -
    
   • Automate your EMIs; it eliminates the chance of payment skips.
   • Be cautious when applying for new debt. Raise funding requests only with the lender where you meet all of the eligibility requirements. Remember that applying simultaneously to multiple financial institutions will result in several hard inquiries, making you a hungry borrower.
   • Instead of defaulting on your loan due to a financial crisis, consider rescheduling and requesting your lender to extend the repayment term.
    

2. Additional Income

   You income grows over time. You get an annual raise at work, or if you own a business, your chances of getting new projects are higher. You must provide proof of a pay raise to your lender, and there is a good chance that your card's limit will be increased.
    
   In addition, if you have a passive source of income, such as a second home or commercial property, you must be earning rent from it. Similarly, the gig economy is gaining popularity, and if you are a freelancer and your income is reflected in your bank account, provide proof to your lender to get your limit increased.
    

3. Pay off some debts

   The more the number of loans you have on your shoulder, the greater your debt-to-income ratio. It is a metric that informs lenders of your remaining income after paying off your monthly debt obligations. It is best to reduce your debt burden before applying to your lender to increase your card limit. To make it easier on your wallet, try paying off a higher-interest loan first.
    
   Here are some tested tips for early debt repayment
    
   • Use the festival bonus you received from your office or the windfall gains you have made from some trade to pay off your debt. 
   • If you recently received a substantial lump sum payment from an investment that matured a few days ago, it may be useful in repayment.
    

4. Limit your utilisation

   If you have a revolving loan, make sure you keep the utilisation rate under control. And the reason for this has already been stated above. 

Also Read: What is the best way to use a credit card?
 

How to increase my credit card limit?

 

• New card

  Instead of requesting a limit increase, you can make a new application with the new lender and provide all necessary documentation. Another advantage of getting a new card is that your credit is spread across multiple cards, so you don't have to be concerned about the card limit.
   

• Apply

  If you want to increase the credit limit on an existing card, submit an application to the lender along with a letter explaining why. Ensure the reason is legitimate and supported by documentation.
   

• Submit documents

  Provide documentation that will persuade the lender of your increased credibility. Furnish a letter of salary increment or the most recent bank account statement demonstrating income from secondary sources.
   

• Balance transfer

  Credit cards, like any loan product, include a balance transfer option. You can transfer the unpaid balance to the new lender at no interest. However, the lender has the final say on whether or not to accept your request.
   

How to check your credit card limit?

 
You can check your credit card limit via net banking by logging into your lender's app with your customer ID or other login credentials. Then, proceed to the credit card section, where you will be given the available limit for the month.
 
You can also call the toll-free number or visit your lender in person to check the available limit.
 

Credit card alternative

 
If you wish to increase your credit card limit due to a medical emergency or unexpected expenses, you can apply for a personal loan. This loan product offer you a larger amount. For example, if you have a good credit history, you can get up to Rs 5,00,000 in funding at a lower rate. Furthermore, your lender's repayment period is 60 months.
 
Also Read: Personal Loan or Credit Card Which one would you go for
 

Conclusion

 
Requesting a credit limit increase is not a difficult process. A simple application with a supporting document can do the job. However, if you are taking this step to cover large expenses, you should get a personal loan.