While credit cards have proved to be one of the most helpful financial tools, they sure come with a number of limitations. Credit limit or cash limit in a credit card, being one of them is something that must be carefully considered. Let’s understand what these terms mean, if there is any difference between credit limit and cash limit in a credit card and how you can check the cash limit in a credit card.
What is the Cash Limit in a Credit Card?
Cash limit in a credit card is basically the maximum amount that you can withdraw using your credit card. Credit card users can withdraw a certain amount from the bank’s ATM within the limits set by the bank. The user, however, will have to repay the amount on a later date, along with the interest amount and other related charges.
What is a Credit Card Limit?
Credit Card Limit is the maximum amount that you can spend using your credit card. The credit limit is decided by the credit card issuing company or the bank on a particular credit card. In simple words, upon issuing a credit card to any user, banks set up a maximum limit beyond which the user cannot spend.
How is Cash Limit and Credit Card Limit Different?
While the cash limit in a credit card and credit card limit might sound the same, they are actually quite different. The cash limit in a credit card refers to the amount that a user can withdraw in cash using his/her credit card, whereas the credit card limit is the maximum total amount that can be withdrawn using the credit card, whether in cash or not.
It must be noted that most credit card issuing companies offer somewhere between 20% and 40% of the total credit card limit as a cash limit. So, for example, if you have a credit limit of Rs. 1 lakh on your credit card, then you can withdraw a maximum amount of Rs. 20,000 to Rs. 40,000 using your credit card, which is known as the cash limit on your credit card. This means that the remaining amount of Rs. 60,000 to Rs. 80,000 can be spent directly using your card only and not in any other form.
The cash limit, however, varies from bank to bank. Moreover, credit card issuers can also increase or decrease your cash limit depending on your spending habits and your repayment behavior, among various other factors.
Can a User’s Cash Limit be Increased?
The cash limit is decided by the credit card issuer. It varies somewhere between 20% and 40% of the user’s credit limit, which is the total amount that a user can spend using his/her credit card. While the cash limit, more or less, remains in the mentioned brackets, there are still chances that your credit card issuer may change (increase or decrease) your cash limit depending upon various factors such as your spending behavior, your repayment habits, etc.
Can a User’s Credit Limit be Increased?
If you handle your credit card well, there are high chances that your credit limit would be increased. However, you may follow the following practices to increase your credit limit–
- Using your credit card regularly for making transactions or paying bills is one of the most basic things that you can do to word on your credit score and eventually, increase your credit limit
- You may choose to upgrade your credit card if you get a promotion or a hike in your current salary. More income would directly serve as a reason for an increased credit limit. You must approach your credit card issuer with your latest salary slips for the same
- If you ever think that you have a reason for an increase in your credit limit, then you must not shy away from reaching out to your bank for the same. If you contact your bank, chances are that they would consider your request and increase your credit limit
- You can also consider getting a new credit card which would have a higher credit limit since you now have a good credit history
- The most important thing that you must do to increase your credit limit is to pay your credit card bills before time. If you keep paying your bills before the due date, banks would be impressed with your creditworthiness and would increase your credit limit
What Factors Affect the Cash Limit in a Credit Card?
A cash limit in a credit card is defined by multiple factors as explained below-
- Applicant’s annual income
- Applicant’s age
- Current debt on the applicant
- Amount of credit in the name of the applicant
- Employment status of the applicant
- Applicant’s credit history
- Applicant’s credit score
Apart from the above factors, you must also note that if you are applying for your first credit card, then there are high chances that your credit/cash limit would be relatively low. This is because the bank/credit card issuer would not be sure of your credit history yet. However, you must also know that if you handle your credit card well, and make timely payments of your credit card bills, then your credit limit may easily be increased. So, apart from a few basic factors, your credit limit lies in your hands!
Cash limit on a credit card is different from your credit limit. While the cash limit refers to the total amount of money that a user can withdraw in cash using his/her credit card, the credit limit is the total amount of money that a user can spend using his/her credit card. The cash limit generally ranges between 20% and 40% of the user’s credit limit.