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Credit Limit is a term that refers to the maximum amount of money that people can borrow from their banks using their credit cards. This limit is set by the bank based on factors such as the income of cardholders, credit score, monthly salary, etc. People can use this limit for online and in- store purchases, bill payments, cash withdrawals, etc.
As banks issue cards with a maximum limit, you may find yourself in a tight spot as your expenses increase over time. You don’t need to consider applying for a new card for this purpose. There are several benefits of Credit Card limit enhancement on your existing card you could look at instead.
The following are some of the benefits of increasing the credit card limit:
1. Low credit utilization
By increasing their credit card limit, cardholders can lower their card usage. For example – If a person’s credit limit at present is Rs.1, 00, 000 and he/she has used only Rs.50, 000, then it means that he/she has used half of his/her full credit limit. So, in case he/she chooses to increase his/her credit limit to Rs.1, 25, 000, but continue to use only Rs.50, 000, then he/she will be using less than half of the credit limit. In this way, his/her credit utilization has been reduced. Here, the expenses of the person has not reduced, but he/she will be considered as a responsible user by financial institutions.
2. No hassle of managing multiple Credit Cards
By opting for a credit limit increase on your existing card, you do not need to go into the hassles of managing multiple cards. You need not remember many pins, manage different credit payment cycles, track expenditures in parallel, and remember to pay on time. Instead, with all your credit needs fulfilled by a single card, you can plan, monitor, and control your expenditures seamlessly.
3. Easier access to get more loans
Given that Credit Card payment history adds to a customer’s creditworthiness, having a long history of timely payments on one card is much more valuable than split credit history among old and new credit cards. Maintaining one card wherein you seek enhancement as and when required, gives more confidence to potential lenders, thereby, receiving access to more funds with ease.
4. Increase in the credit score
When credit cardholders use increase their credit limit but not their expenses, then they end up using less credit than the limit assigned to them. This increases their credit score because there is a decrease in their debts. Financial institutions consider cardholders who use an amount lower than their credit limit as financially secure and responsible because they are spending less than they can. This factor assures the institutions that they will receive their credit card payments on time.
5. Better Rewards
Credit Cards by nature are very favourable to customers who spend and pay back regularly. Also, by not splitting your expenses across multiple cards, you have an added advantage. Some higher ticket size expenditures may get you better rewards, including extended warranties, price protection and more on select products.
6. Multiple Cards not required
It is better to have one credit card with a high credit limit rather than owning multiple cards with lower limits. Having one card makes it simple for cardholders to keep a track of their card activities. It helps them plan their expenses well. Also, cardholders can save on the extra charges that they would otherwise have had to pay for each of the cards, in case they owned multiple credit cards. Owning one card with a higher limit also increases their chance of having a good credit score. More than one credit card account can have a significant impact on the credit history, if all of them are not managed well.
7. Customer Protection
Credit cardholders can use their cards to make large purchases if they have a high credit limit and earn rewards. Not many cardholders are aware of the fact that credit cards provide consumer protection such as price protection, extended warranty, coverage for lost goods, etc. If cardholders use their cards to make large purchases, they can use their card to protect themselves in case of any trouble.