How to Increase Credit Card Limit?

Credit card is one of those financial instruments that offers financial help at the time of need. Having a credit card provides a sense of security against any emergencies that may arise even when you are short of cash or any such surplus funds. Since credit cards are such useful instruments, there are definitely certain restrictions to their use. For instance, every credit card has a predefined credit limit, which means there is a limit to which a credit card holder can spend money using the card.

Let’s dig deeper into what a credit limit is and how you can increase credit card limit.

What is a Credit Limit?

As the name suggests, a credit limit is a limit to the maximum amount that can be spent by the credit card holder using a 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.

It is important to note that the credit limit is different for different types of credit cards and for different credit card holders. The limit defined by the banks and the type of credit card issued to a user depends on multiple factors such as the credit card holder’s income, financial background, his/her credit score, credit repayment history, etc.

You can find out more about the credit card eligibility conditions here.

What Factors Define a Credit Limit?

A credit limit 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 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!

How can You Increase Your Credit Limit?

As explained above, the credit limit of a credit card holder lies in his/her hands only. 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

Why should You Increase Your Credit Limit?

There are multiple reasons that would push you to work on credit health and increase your credit limit. Explained below are some of those reasons-

  • Having a high credit limit directly lowers your Credit Utilization Ratio, which in turn, increases your credit score
  • If you have a high credit limit, banks and lenders would trust your credit repayment capability quite easily. This would increase your chances of getting a loan
  • A high credit limit directly solves the main purpose of having a credit card- providing required funds at the time of any emergency. If you have a high credit limit, it means that you can get a high amount of credit to help yourself in times of need
  • There are many credit card companies that offer various kinds of perks and additional benefits to users with a high credit limit

To conclude:

A credit card holder’s credit limit lies in the credit card holder’s hands. If you make regular payments of all your credit card bills, use your credit card frequently, and try to upgrade your current credit card with a better one, you can easily increase your credit limit.

FAQs
What is the credit limit?
A credit limit is a limit to the maximum amount that can be spent by the credit card holder using a credit card. The credit limit is decided by the credit card issuing company or the bank on a particular credit card.
What factors determine the credit limit?
Multiple factors such as the applicant’s annual income, his/her age, current debt, amount of credit in the name of the applicant, his/her employment status, credit history and credit score determine the credit limit.
Who decides the credit limit?
Banks and credit card issuing companies decide the credit limit of every credit card holder.
What happens if I exceed my credit limit?
If you exceed your credit limit, your transaction would be declined. If in case, your transaction does not decline, you would be charged an overlimit penalty.
How does an increase in credit limit affect the credit score?
If your credit limit increases, your credit score also increases.
Can my credit limit increase request be declined?
Yes, banks may decline your request to increase your credit limit due to various factors such as low income, lesser use of credit card, or default in payment, etc.
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