Credit cards are useful for making transactions online and in a variety of stores. Paying with such cards is easy and quick, too. But they come with onedisadvantage—the credit card limit. If like many other cardholders, you are frustrated by the limit, this article is for you.
What Is Credit Card Limit?
Every credit card company and bank sets a purchase restriction on their credit cards. Simply put, a credit limit means the highest amount you are allowed to spend using a credit card.
Suppose your credit card has a limit of ₹50,000, you can spend only a maximum of ₹50,000 when using it. If you spend over the limit, yourbank might block the card or charge you a percentage of the additional amount spent, as a penalty fee.
This will also negatively affect your credit score.
How is credit card limit determined?
When you apply for a credit card, the lender decides the limit based on different factors. The key aspects that determine your credit limit are as follows:
Age
Income
Credit history
Financial liabilities
Credit score
In addition, if you are getting your first credit card, the financial institution will possibly set a low credit limit on the card. But you will be able to increase it later by paying the bills on time and using it responsibly.
How to Check Your Credit Limit Offline?
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Welcome Kit
When you first receive your credit card, the welcome kit often includes all the important details about your card, including your credit limit. This is a good starting point if you want to know your limit right away. The welcome kit usually comes with your credit card, a guide, and a few other helpful documents. Take a look at the materials inside, and you should find your credit limit mentioned clearly.
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Monthly Credit Card Statement
Your monthly credit card statement is another reliable way to check your credit limit. The statement will typically list important information such as your current balance, available credit, and the total credit limit. You can find this information towards the top of your statement, making it easy to see how much of your limit has been used and how much is still available. Be sure to review your statements regularly to stay on top of your credit usage.
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Customer Care
If you can’t find your credit limit in the welcome kit or on your statement, you can always call your credit card company’s customer care service. Most credit card companies have a dedicated customer support team that can answer your questions, including providing your credit limit details. Simply call the number on the back of your card and ask the representative for your credit limit information. This can be a quick and easy way to get the information you need.
How to Check Your Credit Limit Online?
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Internet Banking
One of the easiest ways to check your credit card limit is through internet banking. Simply log in to your bank’s online portal using your username and password. Once logged in, navigate to the credit card section where you can find details about your card, including your credit limit, available balance, and any recent transactions. It’s quick, simple, and you can check it anytime from the comfort of your home.
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Mobile Banking
If you prefer using your phone, mobile banking apps are a convenient way to check your credit card limit. Most banks have user-friendly apps that allow you to view all your account details, including your credit card limit. Just open the app, log in securely, and go to the credit card section. You’ll be able to see your current limit, how much you’ve used, and what’s available for spending.
How to increase your credit card limit
If you are not satisfied with your credit limit, it is possible to increase it significantly. Check the following list to understand how to increase the limit on credit cards.
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Make a request
This is the easiest approach to increase your card’s limit. The approval of your request depends on many factors like credit score and history, but if you do not ask, you will never know.
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Improve credit score
Your credit score is one of the most crucial factors that determine the credit limit. To increase the limit, you must first improve your credit score by paying your bills and loan equated monthly installments (EMIs) on time. When you have a high score, the bank will increase the credit card limit.
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Pay the bills on time
You need to prove to the credit card company that you can manage using the card and pay your dues on time. If they trust you with the repayments, they will increase the limit. Therefore, start paying your bills before the due date to improve your credibility.
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Ask for a reasonable limit
If you ask for an unreasonably high limit, the chances are that the financial institution will reject the request. So, it is important to be reasonable when you ask for a higher credit limit on your card.
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Update financial information
Your regular income is one of the parameters banks use to estimate the limit on your credit card. Thus, if your income increases, you become eligible to get a higher limit. If your financial situation improves after taking a credit card, you must inform the bank and ask them to increase your credit limit.
Advantages of increasing your credit limit
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Helps during emergencies
Situations like medical emergencies often require you to have access to immediate funds. A credit card with a high limit can be helpful in such circumstances. It enables you to spend more money than you may have during a time of crisis.
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Lowers credit utilization
A higher credit limit allows you to reduce your credit utilization. In turn, this also increases your credit score.
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Makes getting loans easier
When you have a good credit score, low credit utilization ratio, and high credit limit, financial institutions consider you creditworthy. And this makes it easier for you to avail of a loan from them.
Total credit vs. available credit limit
One aspect about credit cards that might confuse users is the difference between total credit limit and available credit limit. The former is the maximum purchasing power of your card.
If you cross this limit, the bank will charge you a penalty fee. On the other hand, the latter is the amount still available on a particular day after spending money on the card.
Let us assume your credit card has a limit of ₹50,000. Now, this amount is your total credit limit. If you purchase something worth ₹20,000 using the card, your available credit limit will be ₹30,000.
The card limit again increases when you pay the credit card bill on time. However, remember that it increases depending on the bill amount you pay.
Therefore, if you settle the entire amount of ₹20,000, the limit will reset to ₹50,000. But, if you pay only the minimum amount due, the limit will increase accordingly.
How credit limit affects your credit score
The credit score is a numerical representation of your credit history. Lenders estimate your creditworthiness based on your credit score.
If you have a high credit score, it becomes easier to avail of a loan and other deals. On the other hand, a low credit score can make it difficult to get loans.
As credit cards are essentially loans, your usage and repayment behavior affect your credit score. Different credit bureaus keep track of your credit utilization or how much of your credit limit you use every month.
They determine your credit score based on that and a variety of other factors. The bureaus consider 10% to 30% credit utilization as decent, but anything higher than that can hamper your credit score. To maintain a good score, try to limit your card use and pay the entire credit card bill on time.
Impact of going beyond your credit limit
Going beyond your credit limit has many disadvantages. The financial institution will levy an over-limit charge for paying more than the allowed amount.
Additionally, they may block your credit card. It will also negatively impact your credit score. Moreover, you should be careful when withdrawing cash using your credit card.
It requires you to pay 2.5% of the amount as cash withdrawal charges on the credit card. So, it is better to avoid using credit cards for cash withdrawal and going beyond your limit.
Frequently Asked Questions (FAQs)
What does over limit mean on a credit card?
An over-limit feature allows you to spend more than your credit limit, but keep in mind that you’ll be charged a fee for doing so. It's a helpful option in emergencies, but it’s good to keep track of it to avoid extra charges.
What is the maximum credit card limit in India?
There isn’t a fixed credit limit for credit cards in India. However, most banks follow a general rule where the limit should not be more than twice your monthly income. This is just a guideline, and your actual limit can depend on factors like your credit history and income.
How much of my credit limit should I use?
To keep a good credit score, it’s recommended to use less than 30% of your available credit. Some experts suggest trying to stay under 10% for even better results, as this shows you are managing your credit responsibly.
Is it beneficial to increase my credit card limit?
Raising your credit card limit can be helpful for your credit score, as long as you don’t spend too much of it. A higher limit with low usage can improve your credit score by lowering your credit utilization ratio, which makes you look more responsible to lenders.
How can I check if I’m eligible for a pre-approved credit limit increase?
Most banks inform eligible customers through SMS about a pre-approved credit limit increase. However, you can also check your eligibility by logging into your online banking account or by calling customer service.
