The number of active credit card users in India will soon hit the 100 million mark, as per the latest data by the RBI. With changing spending patterns and exciting perks offered by credit card issuers, this is not very surprising. After all, credit cards also help users build credit history and offer better safety against fraud.
That said, as financial needs evolve, opting for an increase in credit limit may be pertinent to India’s growing customer base. As a cardholder, you may often wonder how to increase credit card limit and if doing this has any upsides. It certainly does, and here’s why.
Decreases Your Credit Utilisation
Keeping your credit utilisation ratio below 30% is the best way to maintain a healthy credit score. This ratio is expressed as a percentage of the credit utilised versus the total limit sanctioned by the issuer.
Consider a hypothetical example to understand this concept better. If your current outstanding is ₹15,000 and the total card limit is ₹50,000, your credit utilisation ratio will be 30%. Any amount spent over and above this percentage can affect your credit score negatively.
Increasing your credit limit will decrease this ratio, helping you manage your expenses effortlessly. If you are wondering how to increase your credit card limit, here’s what you need to do:
- Pay your existing bills on time and in full
- Use your card regularly and in a disciplined manner
- Ask your issuer for an increase in the limit when your income increases
Boosts Your Credit Score
Your credit score is a 3-digit numerical summary of your creditworthiness. When evaluating your score, credit bureaus factor in your credit utilisation ratio. As mentioned earlier, exceeding this ratio is a no-no as it signifies you may be credit hungry. So, lenders may perceive you as a high-risk borrower more susceptible to defaults.
Conversely, increasing the card limit ensures you don’t exceed the 30% ratio and helps you maintain an optimal score. Say you spend ₹50,000 on your credit card every month, which has a total sanctioned limit of ₹1 Lakh.
In this scenario, your credit utilisation ratio will be 50%, which is much higher than the accepted limit. Say you apply for a credit limit enhancement and the issuer adds ₹70,000 to your existing credit limit. Your total limit is now ₹1.7 Lakhs, and your utilisation ratio is approximately 29.41%. You are still within the 30% limit, and your credit score will not be hampered.
Acts as a Source of Emergency Funds
A higher limit is helpful when you face financial exigencies, such as sudden hospitalisation or any other unexpected emergency. The increased credit limit acts as a cushion during financial shortfalls, keeping you from compromising on your investments or savings.
An increased limit also helps you benefit more from the ATM withdrawal facility, if offered by your credit card issuer, since the cash withdrawal limit is linked to your credit limit.
Helps Manage Big-ticket Purchases
Converting huge bills to manageable EMIs is one of the most popular features of credit cards. Whether you need to buy the latest gadget or an advanced kitchen appliance, you can convert the total purchase cost into affordable monthly instalments.
What’s more exciting is that some issuers may offer EMI facilities at zero or low interest costs as per deals with partner retailers. A higher credit limit gives you more purchasing power while allowing you to keep your credit utilisation ratio under control.
Provides Quick Access to Loans
One of the not-so-evident benefits of increasing your card limit is that you can opt for a higher loan amount against your card. As you can guess, the higher your credit limit, the higher the loan amount you can get.
These pre-approved loans are offered to eligible customers based on spending behaviour, bill repayment history, outstanding balance, and other parameters. This can be a source of instant financing, which doesn’t require paperwork, application or any lengthy process.
As you can see, these are just a few of the advantages you can enjoy once you know how to increase your credit card limit. All you have to do now is find the ideal credit card and apply for it. If you are looking for a premium credit card that combines personality with premium perks, the metal One Credit Card may be the right fit!
This mobile-first credit card not only offers perks such as 5X rewards on top two spending categories but also helps you plan your budget and set spending limits so you can swipe more confidently than ever. To enjoy exciting rewards and benefit from a variety of features on its powerful app, apply for the One Credit Card today.
