The credit limit you get may vary from card to card while applying for a credit card even if it is at the same time. The issuer determines the limit while issuing the card. There are several factors, such as income, age and credit score, that determine the credit limit.
However, if you want to increase the credit limit, certain factors like repayment behaviour play a vital role. Increasing this limit can provide greater financial flexibility by enhancing your purchasing power. Understanding the various processes to increase the limit you can utilise them in your favour.
How Issuers Determine the Limit of Your Credit Card
When you apply for a credit card, your card provider sets a predetermined limit for you on the basis of numerous factors. By analysing these, you can understand how the process works:
Ability to Pay Back: Issuers decide the limit based on the income as it determines the chances of paying back the bill amount. If you have a higher monthly income, the issuer may offer you a higher credit limit since you may be able to afford it easily. You can access enhanced credit limits with a higher income.
Length of Credit History: Considering this factor, the issuer can check your reliability as a borrower in taking on and repaying credit. The longer the history, the better the issuer can access your credit handling behaviour; thus, increasing the chance of getting a high credit limit.
Credit Repayment Behaviour: While determining a credit score, the issuer checks the repayment history. This provides adequate information on your bill payment behaviour. Apart from that, paying EMI regularly on time can indicate good repayment behaviour. Remember, defaulting on payments can have a negative effect as it indicates you as a risky borrower.
Credit Utilisation Ratio: The amount of credit you spend in your billing cycle compared to the limit you possess is reflected in the credit utilisation ratio. The more you spend using your credit cards, the more your CUR increases. A higher ratio may reflect dependency on credit, which can adversely affect your score and access to higher limits.
Perks of Increasing the Limit of Your Credit Card
There are several benefits to an improved credit limit. For example, you can maintain a healthy credit utilisation ratio. If you have higher spending in comparison to the assigned limit, then opting for a high limit is a rational choice. You can also enjoy the following perks:
Enhanced Reward Programs: With higher limits, you can carry out the expenses without splitting them into multiple cards. That way, you can earn higher reward points by spending on high-ticket purchases. The benefits may also include price protection and warranties on specific purchases.
Greater Purchasing Power: A higher limit can act as a safety net in times of financial needs or emergencies. You can get instant access to large sum of amount and repay according to your convenience. Unlike conventional loans, you don’t need paperwork or meet eligibility criteria.
Methods to Enhance the Limit of Your Credit Card
While the credit limit is predetermined, you can request an increase in due course of time. You can elevate the chance of getting approved by following certain methods.
Pay off Bills on Time: If you have outstanding bills from the previous billing cycle before applying for a credit increase, consider paying off the bills. Timely repayments depict you as a responsible borrower, hence enhancing the likelihood of getting approval for a higher limit.
Update Income Sources: It is important to keep your income-related information up to date, as income is one of the major criteria in determining the credit limit. Say you have just received an increment. By providing this information to the issuer, you can get a new card with a higher limit or have access to a higher limit using the same credit card.
Improve Your Credit Score: Before applying for a higher credit limit, ensure you have a healthy credit score. If needed, you can improve your credit score by paying your bills before the due date and in full. Planning your budget, having a spending limit and setting reminders for due dates can be helpful in achieving this.
Opt for a Reasonable Hike: While applying for an increased credit limit, opting for a significantly higher limit can reduce the chance of getting approved. Select a limit close to the existing one and provide appropriate reasons why you need it. Also, provide enough evidence that supports your affordability for a higher limit.
While there are various steps you can take to get access to an enhanced credit limit, it is essential to utilise the limit you get responsibly. If you are looking for an all-rounder card that makes it easy to do so, consider the One Credit Card. You get instant approval online, and earn 5X reward points on your top two spending categories each month, no matter what they are.
Using the powerful One Credit Card mobile application, you can manage your purchases more effectively and control all aspects of usage. Moreover, you can save more with a wide range of discounts on shopping, dining, upskilling, rental payments and more. This app makes staying on budget easier as it allows you to set a spending limit and also gives you a spending analysis. To enjoy all these benefits and more, apply online now!
