How to Increase Your Credit Card Limit and Why it is Useful

We have been experiencing a second wave of coronavirus in India. There are chances that the lockdown situation may happen once again; this might lead to a slowdown in business activities. So, in order to save ourselves from cash crunches and medical emergencies, we can use credit cards. A credit card is a financial instrument that lets an individual or even a company borrow funds immediately from the banks, with a promise to pay later within a stipulated given time. The problem is, an entity can only borrow funds with a credit card up to a specific limit. Given the lockdown situation and any medical urgency, an entity might be forced to look for other fund sources due to the limit set on its credit card. In order to mitigate this risk, there is an option to increase the credit card limit. Now, coming back to the question, how can one increase their credit card limit?

While some credit card users automatically get their increase in credit limit from the issuer, other users only get a raise in the limit if they ask. To initiate this process, one can call the toll-free number (posted on the back of the card or on the monthly bill) and listen to the prompts. There will be a prompt for requesting a credit limit increase. 

Getting a credit limit increase feels like getting a promotion for some, or even a raise. It is a big moment in the person’s credit life, especially if one is new to credit or improving a bad credit score. An increase in credit limit feels like an up-gradation, meaning that there has been responsible spending with the credit card.

What is the credit utilization ratio?

It is the ratio of the outstanding credit card balance to the credit card balance. Let’s suppose your credit card limit is 1 lakh, and if one spends 30,000, then the credit utilization would be 30% of the credit card.

A bigger credit limit increases the ability of the user to purchase, but that is not the only advantage of an increased credit limit. It’s important to know that thirty percent of the credit score is based on the level of debt. A significant part of that is your credit utilization or the amount of available credit you’re using. 

Are you confused about how to increase your credit card limit: A credit limit increase will lower your credit utilization, assuming you keep the make the same amount of payments. This will eventually translate to a higher credit score.

Automatic credit limit increase: 

Credit card issuers review the account periodically and automatically raise the user’s credit limit if they are successfully meeting the criteria. If the user has been making the payments on time, on a monthly basis, and if their credit utilization lies in the manageable percentage according to their credit limit. All in all, if the user has been spending responsibly through their credit cards, their credit limit can be increased automatically.

Requesting an increase from the card issuer

While some issuers will automatically increase the credit limit, some will increase the limit only if you ask them. First, one can dial the toll-free number written on the credit card’s back or the monthly bill. Listen to the automated voice, and respond to the one requesting the increase in credit card limit. If it is not listed, ask to talk to the customer care representative and increase the credit card limit.

Some issuers may even let the user request for the credit limit increase online; one can log in to the account and raise a request for an increase in credit card limit. The issuer may ask you some questions like your monthly income, the reason for the credit limit increase, and the credit limit increase one wants.

The soft and hard pull

The credit card issuer may access your credit reports via soft pull or hard pull methods to proceed with the request. A soft pull inquiry doesn’t affect one’s credit score. However, a hard pull can affect the credit score depending on the other information contained in one’s credit report. The hard pull will appear on all the versions of the credit report for up to 2 years. If the user is debt-laden, they should wait to increase its credit limit. One should always inquire with their credit card issuer about the method they would approach to process the credit reports.

Increase your security deposit

If the user has a secured credit card, they may increase their credit card limit by typically depositing more cash on the security deposit. The best option for the user to improve their credit card limit is by calling the customer care number written on the card’s backside and asking them the exact steps required to raise the credit card limit.

If you’re looking to get a credit card, you can opt for the Bajaj Finserv RBL Bank SuperCard, considered by many to be the best credit card in the country. With the power of four cards in one, it is everything you will ever need.