Enhancement of Credit Limit on Your Credit Card and Your Purchasing Power
When credit card companies provide you with a credit card, they give you a credit limit up to which you can extend your credit card bill payment. Issuers determine your credit limit based on numerous parameters like your repayment history, monthly income, and creditworthiness. A lower credit limit gives you less leverage to spend and reduces your credit score by keeping your credit utilisation ratio high. Therefore, the best way to increase your make higher expenses with your credit card without damaging your credit score is to request an increase in your credit card limit.
Read on to know how to enhance your purchasing power by increasing your credit limit and its benefits.
Benefits of Increasing Your Credit Card Limit
Mentioned below are some benefits of increasing your credit card limit:
Reduced Credit Utilisation Ratio: You can reduce your card utilisation ratio by increasing the limit of your credit card bill payment.
Improved Credit Score: If you keep your credit utilisation rate less than 50% of your available credit, you get a chance to improve your credit score and improve your creditworthiness for financial institutions. Lenders perceive you as a low-risk borrower and agree to lend you money with better terms and conditions.
No Requirement for Multiple Cards: Having one credit card with a high credit card limit is better than maintaining several cards simultaneously. It will be easier for you to keep track of your card activities and accordingly plan your expenses. Besides that, you save the extra charges you have to pay for maintaining each card separately.
Easier Loan Availability: Financial institutions consider you safe if you have a high credit limit and low credit utilisation ratio. A high credit limit also works as proof that your credit card provider trusts you with money. So, lenders may make loans readily available to you with better terms and conditions.
Help During Emergencies: When you have a card with a higher credit card bill payment limit, you can use your card in case of emergencies rather than borrowing money from other sources.
Tips to Increase Your Credit Card Limit
Credit card companies will increase your credit limit only if you have a high credit score and a strong repayment history. They also consider several other factors before accepting to request. Therefore, here are a few tips that can increase your eligibility for a higher credit limit:
- Stay Consistent with Your Credit Card Bill Payment: Credit card companies regularly monitor your credit card bill payment habits. If you are habitual of delaying or missing your bill payments, they may refuse your request for an increase in your credit limit. So, always pay your credit card bills in full before the due date.
- Increase Security on Secured Cards: Credit card companies offer secured cards to individuals with low or no credit scores. Your credit limit on these cards depends on the value of the collateral you provide. So, if you want to increase your credit limit, you may consider increasing the value of your collateral.
- Increase Your Income: A higher credit limit enhances your purchasing power, which automatically translates into a higher credit card bill payment. Therefore, find ways to increase your income before applying for a credit limit increase. With a higher income, your issuer can be assured that you have a good financial backup to pay your bills on time.
- Apply for a Card with a Higher Credit Limit: If you have a good income and a high credit score, you may apply for a new card with a higher credit limit.
- Look for an Annual Increase: Some issuers offer an annual increase in your credit limit if you pay your bills on time. Check your issuer about such an annual increase and avail it.
- Improve your Credit Score: Credit card issuers will readily accept your request for a credit limit increase if you have a high credit score. After all, it is a parameter to determine your creditworthiness and repayment history. Some ways to increase your credit score are:
- Pay your bills on time
- Keep your DTI ratio and credit utilisation ratio low
- Diversify your credit portfolio with different types of cards and loans
- Maintain old cards and accounts to prolong your credit history
Your income, repayment history, credit record, and credit score are some common factors that can help you increase your credit card limit. These are the parameters based on which credit card companies decide to improve your credit limit.
While scouting for an increase in your credit limit, be sure to keep your expenses under the limit. If you increase your expenses with an increase in your credit limit, you will stay stuck in the same situation without any benefit. If you are ready, contact your credit card issuer over the phone or online and request an increase in your credit limit to make credit card bill payment easily manageable.