Credit Card Limit: The biggest reason and biggest advantage of using a credit card is that it covers your expenses in such a situation, when you cannot bear the burden of extra expenses.
But sometimes your expenses exceed your limit, or you suddenly have an emergency, in which case you feel the need for a higher credit card limit. The good thing is that you can meet your needs by increasing the credit card limit. Banks give you this facility. You can apply to the bank to increase your credit card limit. For this, banks check you on certain parameters and see whether your limit can be increased or not.
Benefits of increasing credit card limit
There are many benefits of increasing the credit card limit. First of all, when your credit card limit is high, more of your needs are covered. If you need more money for lifestyle expenses or medical expenses or child’s fees, then you get a backup. This increases your buying power.
Credit score is better than credit utilization ratio
Banks look at your credit utilization ratio. CUR means that how much is your credit limit and how much you spend. Lower the CUR, better is the credit score. Generally 20-30% CUR is considered good. If your CUR is low then banks consider you a less risky customer.
Think of it this way, suppose you are relying on credit cards for most of your expenses. Your CUR has reached 70-80%. That means you are spending up to 80% of the limit. In such a situation, the bank will feel that you do not have the money to cover your expenses and you may default on the loan. In such a situation, there is an impact on your credit score, as well as there may be a problem in getting the loan. Because one thumb rule is that banks want to give loan only to him, so that he knows that he will continue to get regular income in the form of installment.
But remember these things before increasing credit score
The biggest risk of increasing the credit card limit is that due to the increase in buying power, you start spending extravagantly. When you cross the limit of your budget, you do not even know, in such a situation your credit score is affected, the cost of EMI on your head also increases.
Due to this you also have to pay more interest. If you spend more then the burden of interest also keeps increasing on you. It is not necessary that you will be able to clear your entire credit card due every month, in which case it may add more worries to you.
You can also keep multiple credit cards without increasing the credit card limit. With this, you will get different features and offers, but if you want to adopt this option, then you should know that you will have to pay different annual charges on different cards. Also, having multiple cards can make it difficult to manage payments or remember the credit period.
