Credit card limit is the purchase limit set by the credit card company or bank on a particular credit card. This usually refers to money, it is the maximum amount that a user can spend using a credit card. Understand that if your bank provides you a credit card with a limit of Rs 50,000, then you cannot spend more than that amount on your card. The credit limit varies depending on the type of credit card and is decided based on the eligibility of the customer. However, banks can increase your credit limit. For this, he takes decisions only after considering certain factors.
What do banks consider?
When you apply for a credit card, your bank sets your credit limit. This is actually decided keeping many things in mind. These include your annual income, your age, the amount of debt you currently have, the amount of credit in your name, your employment status and most importantly, your credit history and your credit score. If the bank feels that you fit these criteria then it increases the limit of your credit card. If the bank feels that the essential items are not matching then it will not increase the card limit.
According to Bank Bazaar, if the card you are applying for is your first credit card or you do not have any credit in your name, your credit card will have a lower credit limit. This is because the bank doesn’t know exactly whether they should take a risk on you or not. However, low credit limits do not remain low for long. If you use your card properly and make your payments in full and on time, the bank will give you the option to increase the credit limit on your card.
Benefits of increasing credit card limit
Once the credit card limit increases, it also brings some benefits. First of all, your purchasing range increases. If you want, you can purchase up to that new limit. Plus, you get help during emergencies. A high credit limit always comes in handy during financial or medical emergencies. Additionally, a higher credit limit that you don’t use makes the bank or lender view you more favorably. In such a situation, it becomes very easy to get the loan approved. Most credit cards that come with high credit limits also come with many perks that you can avail like access to airport lounges, hotel memberships, etc.
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