Credit Card: In today’s time everyone uses credit card. It is very helpful in times of need. Initially, the companies allow a lower credit limit to the new applicants. But it is increased after the customer’s timely payment and salary growth. However, accepting the offers of high credit limit many times people get stuck badly. In such a situation, today we are going to tell you about the advantages and disadvantages of increasing the credit limit.
Benefits of increasing credit score
Lenders generally consider the Credit Utilization Ratio (CUR) above 30% to be an indication of a credit loan. So are more sensitive by default. The CUR needs to be within 30% to improve the credit score. For example, suppose you spend about 50 thousand rupees every month on your credit card, its limit is one lakh. In this case your CUR will be 50%. If your credit limit is increased to Rs 1.7 lakh, your credit utilization ratio will be 29 per cent.
Increased credit limit can help as a source of emergency fund during times of financial crunch, job loss, illness, accident etc.
Apart from this, those who do not have the ability to pay the credit card bill by the next due date. They can convert their entire card bill or part of it into EMI.
With an increased credit limit, loans of higher amounts are easily available.
Disadvantages of increasing credit score
By increasing the credit card limit, we become able to spend more. In such a situation, people take the burden of more loans. As such, it should be used wisely. One can spend with the increased credit limit. But if he is not able to pay then it affects his score.
Along with this, the credit card limit should be increased according to its dependence.
If you do not pay every month, you will have to pay more interest. On the other hand, if the credit card is stolen, the loss will be higher, as the limit is higher. So always use credit cards responsibly with limits.
Posted By: Navodit Saktawat