The Truth About Increasing Your Credit Card Limit

Those who have a credit card often find themselves questioning whether they should ask for an increase in their credit limit. This article aims to clarify whether one should avoid increasing the credit card limit and explores the benefits and considerations of doing so.

Understanding the Credit Card Limit

Credit card users typically have a certain credit limit granted by their card issuing company. This limit is designed as a safety measure to ensure that cardholders can afford to pay their outstanding credit card bill at the end of each month. Conversely, as your income and repayment behavior improve, credit card companies are likely to consider increasing your limit.

The Benefits of Increasing Your Credit Card Limit

An increased credit card limit comes with several advantages:

Greater Purchasing Power: A higher credit limit means you have more funds available to make purchases, enhancing your purchasing power. Handling Financial Emergencies: An increase in credit limit can help you manage unexpected financial requirements, such as job loss, illness, accident, or disability. This is particularly useful in times of financial emergencies. Boosting Credit Score: Credit bureaus use your credit utilization ratio (CUR) when calculating your credit score. A lower CUR (proportion of the total credit limit used) can improve your credit score.

Loan Against Credit Card

Having a higher credit limit can also facilitate obtaining a loan against your credit card. These loans are usually granted based on your credit limit, making them a convenient financial tool.

Considerations and Best Practices

While increasing your credit limit can be beneficial, it is essential to maintain healthy financial behavior. Always ensure you can afford to pay your new credit limit on time. It is crucial to manage your debts and avoid surpassing your budget, as this can lead to financial strain.

How to Request an Increase in Credit Card Limit

Here are the steps to follow when requesting an increase in your credit card limit:

Call the customer care number of your bank or financial institution and request an increase in your limit, providing a reason. Ensure that your debts are low and that you have no outstanding amounts at the time of your request for it to be considered. Inform the bank of any promotions or salary increases, which can lead them to issue a new credit card with a higher limit or raise the limit of your existing card. Some banks offer an annual increase in credit limit based on a good credit score or repayment history.

In conclusion, while it is true that increasing your credit card limit comes with responsibilities, the benefits often outweigh the drawbacks. By carefully managing your spending and ensuring timely repayments, you can enjoy the perks of a higher credit limit while maintaining financial discipline.