How to increase credit card limit: Taking advantage of the tailwinds of rising incomes of a section of the middle class, digital e-commerce and increasing discretionary spending, a quiet credit card boom is taking place in India. Reserve Bank of India data show that there were 10.1 crore credit cards in the country at the end of FY24 – 21% more than the entire population of Germany. Just five years ago, it stood at 5.77 crore in FY20.
And expenditure through credit cards has expanded at a faster clip – from Rs 7.3 lakh crore in FY20 to Rs 18.3 lakh crore in FY24. In contrast, debit cards are quickly losing market share under pressure from both credit cards and the UPI onslaught.
Issuer’s prerogative
One of the most important aspects of any credit card is the credit limit it offers. In simpler words, it is the maximum limit that a card allows one to spend. It is fixed by the credit card company.
It is easy to understand that the higher the credit limit, the easier it is for the user. There are several factors on which the credit limit depends.
Credit card limit: Determining factors
The most important, of course, is the income of the applicant. Other factors include, whether the applicant is serving any earlier loan at the time of application, his/her repayment capacity, age of the applicant, credit history of the applicant, his/her credit score. The type of credit card issued to a person also determines the limit of credit it offers.
It is easy to understand why credit card issuing banks remain circumspect in the beginning and offer a relatively low credit limit for those who are getting credit cards for the first time. Since they have no credit history, the issuer can’t be sure setting what limits would be prudent.
Factors to increase credit card limit
Once the user starts demonstrating responsible use of the card and payment record, the limit can be gradually raised.
HDFC Bank, the leader in issuing credit cards in the country, has a few tips for enhancing credit card limits.
Inform the bank
To begin with, the user has to apply to the issuing bank to enhance the credit limit. The bank will grant the permission based on the following factors.
If your pay/income has gone up, increasing your capacity to repay loans, the bank will certainly consider your application favourably. But the bank needs to be informed about the rise in your income.
Increase credit card limit or switch cards
You could request the bank to either raise the credit limit of your existing card or issue a new card to you that will allow you to spend more.
Another advice is that it might help to put all or most of your money into one account and present a consolidated picture to the issuing bank, rather than have your cash in separate bank accounts.
Repay on time
Besides, if the user regularly pays the balance amount on time, some banks offer them a raise in the credit limit. Sometimes, they also come with good offer in rewards.
Improving one’s credit score through responsible financial behaviour always pays. The credit score plays an extremely significant factor in ensuring the credit limit just as it does in getting approval on any loan application.
The key to a good credit score lies in paying EMIs and all other dues to banks and NBFCs on time. Also keeping spending limits within limits is a way of ensuring credit score health.
A credit card carries a high degree of risk for the issuer. The loan that a bank extends to the user of a credit card is an unsecured loan, which means there is no collateral for the loan. Therefore, the limit which the issuer sets for a credit card user is extremely significant.
How to increase credit card limit: The credit limit on a credit card is of utmost importance since it sets the limit to which you can spend in any situation. There are a few ways of increasing this limit if you think the current limit in your card does not match your needs. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
