How to Check and Increase Your Credit Card Limit Easily

1. Your annual income
2. Your age
3. The debt you currently have
4. The amount of credit in your name
5. Your employment status

And most importantly, your credit limit is determined by:

1. Your credit history
2. Your credit score

Do note that if this is your first credit card, chances are that you might have a low credit limit. In such cases, the banks do not know if they should take a risk on you. If you use your card often and make payments on time, you can increase your limit.

How to Increase Credit Card Limit

Now that you know how important your credit limit is, the question to ask is how do you increase the credit limit on your card?

1. Use Your Card: If you use your card regularly and pay your bills in full and on time, the bank will automatically increase the credit limit on your card.
2. Provide Your Income Statement: There could be a case where your income has increased, and you are still using your old credit card. In such instances, you could approach the bank with your latest payslips and request for a credit card upgrade along with an increase in the credit limit.
3. Request to increase Credit Limit: If you send a request to the bank to increase your credit card limit, most banks agree to do so depending on the reason you have provided for the request. You can raise a request to increase the limit through netbanking or visit the branch of the bank.
4. Apply for a New Card: You could also consider applying for a new credit card which comes with a higher credit limit than your current card. In fact, if you have been making payments on time on your current credit card, you shouldn't find it too difficult to get approved for a card with a higher credit limit.
5. Pay Your Bills on Time: If you are regular and timely in paying your credit card bills, your credit score can increase, and the bank will see you as a responsible cardholder. This often results in banks offering you a higher credit card limit.
6. Be Patient and Wait: If you hold a credit card long enough, the bank will automatically increase the credit limit on it. The only downside to this method of increasing your credit limit is that you need to be patient and wait.

Benefits of Increasing the Credit Limit on Your Card

You probably already have surmised some of the benefits of increasing the credit limit on your card, but here they are just so you know how an increase in your card's credit limit can help you:

Lowers Your Credit Utilisation Ratio: You probably already know this. But the importance of maintaining a low credit utilisation ratio cannot be stated enough. The lower the ratio the higher your CIBIL score.

Makes It Easier to Get Loans: A high credit limit that you do not use makes banks and lenders look at you more favourably. Thus, getting approved for a loan becomes that much easier.

Helps During an Emergency: A higher credit limit always comes in handy during a financial or a health emergency.

Access to Perks: Most credit cards that come with a high credit limit also come with many perks such as airport lounge access, membership to hotels, etc.

Difference Between Total Credit Limit and Available Credit Limit

If you have scrutinised your statement, you will see that there are two limits mentioned - your total credit limit and your available credit limit.

So, what exactly are these?

Your total credit limit is the amount above which if you spend, the bank will charge you a penalty. This is basically the same as the credit limit mentioned early on.

Your available credit limit, on the other hand, is the amount you currently have available to spend.

Why Your Credit Limit Matters

You now know what your credit limit is. This information should be enough for your day-to-day credit card related transactions, right?

Well, not quite.

Remember that all-important credit score? Well, your credit limit indirectly ties into it.

It ties into it with the help of a widely used ratio which is used to calculate the current amount you owe on your card compared to the total credit extended to you and is expressed as a percentage.

The formula for the same will be:

1. Credit utilisation ratio = (Outstanding balance on all credit cards/Total credit extended on all credit cards) x 100

It is generally advisable to keep your credit utilisation ratio under 30%.

What Does This Ratio Mean?

The Credit utilisation ratio measures how much credit you use. High ratio makes you appear credit hungry and may lead to default. Lenders see it as a sign of poor financial management. 

This, in turn, leads to a reduction in your credit score making it that much harder for you to get a loan.

A low credit utilisation ratio means you pay bills on time and manage finances well, making you a good option for lenders. This increases your credit score and increases the likelihood of loan approval. Lenders can hedge their bets on your financial stability.

Using an Example to Understand Credit Utilisation Ratio

How does your credit card limit affect the credit score?

Credit score is used by banks to determine creditworthiness. Credit limit and utilization ratio affect credit score. Use credit limit wisely to keep score high. Credit utilization ratio should be 10-30% to maintain score.

1. Minimizing the use of credit card
2. Ensuring credit card payments are done in full and on time
3. Having alternative sources of income
4. Minimizing additional liabilities

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