If you have an existing credit card, there are chances that you may feel the need for a higher credit limit as your income and credit card usage goes up with time. Banks, as a part of their marketing initiatives, may offer an enhanced credit card limit to their active and responsible credit card users. However, when it comes to requesting an increase in the credit card limit, banks get selective.
An increase in the credit card limit gives you additional leeway in managing your expenditure and is justified once your income and spending capacity increases. Further, a higher credit card limit comes in handy when one is planning to go for foreign travel as it provides additional comfort to meet higher than expected expenses. An additional credit limit enables you to keep your credit utilization ratio, which is one of the crucial factors impacting your credit score. A general recommendation is that you should not avail credit exceeding thirty percent of your credit limit
If you decide to go ahead and apply for a higher credit card limit, here are some tips that you can use to get your credit card limit increased:
1. Apply for a New Credit Card which has Higher Limit: This is the simplest of option. Each card usually also has a specific credit limit depending upon its target audience demographics. You can research for a new credit card that will suit your needs from a different lender, or you can even apply for a new card of the same lender as well.
2. Identify an existing card for higher credit limit: When you have multiple credit cards, it is essential to assess the benefits each card provides and choose the one that will be most beneficial to you if its limit is increased.
Avoid applying to all existing credit card issuers to increase your credit card limit as it would mean each lender pulling your credit report, each pull causes your credit score to dip by around 5 points. Thus, multiple pulls would convey desperation for a higher credit limit, thus reducing your chances of getting higher credit.
3. A Good Reason: Before you seek your lender for increasing the limit, you need first to evaluate why you want to improve your credit card limit. You cannot go to the lender and plead for increasing your card limit. You need to ensure that you have a case that deserves an increased credit card limit. Some good reasons are:
a. You always pay more than the minimum balance due.
c. Your income has increased
d. You pay off your credit card bill each month on time
e. You have never touched 30% of the credit utilization limit.
4. Do not Rush: By this I mean you should not ask for an increase of limit too soon. Most credit card issuers review your credit performance every 6 months. However, it in no way it means that 6 months is the optimum time after which you can ask the lender to increase your credit card limit. If you do so, it is likely to result in rejection.
Instead, wait for at least 12 months before requesting an increase in the limit, which should always be coupled with good reasons.
5. Don’t Be Greedy: Whether your credit card limit will be increased or not is a decision that will be taken based on your credit history, your credit limit requirement and your existing income. Asking for an increase as high as 100% is not a sensible option even if your credit history is good.
Instead, remain within a 25% range as a higher credit card limit request may be rejected by lenders.
6. Opt for Balance transfer : You can transfer your balance from one card to another. It is a profitable option as lenders offer a discount on the interest rate for transferred balance resulting in lowering your interest burden, some also offer a no-interest period as well.
Through balance transfer, lenders get the chance to earn more from the interest charged which would have otherwise gone to another lender. Proposing an increase in credit limit through balance transfer is more likely to be accepted than a normal request. Although, your good credit performance with that lender would still be an essential factor in getting the approval.
Remember that it is never wise to for an increase in credit limit only to be able to afford higher spending. The increased credit limit is not an increased wealth. Ideally, it is wise to be patient and wait for the lender to increase your credit limit naturally. If you have been performing well and are in good standings of the lender, then you should be able to get an auto increase from your credit card issuer regularly.
Nishant is a passionate blogger and a financial adviser. He has been serving society as afinancial adviser for the past 6 years. He loves studying various topics and news related tofinancial matter in the market. He usually shares his opinion on Greetings of the Day.