When you apply for a credit card, the underwriters in the company help to decide what limit should be placed on your credit card. All credit card companies check out several factors, including your credit score, payment history, repayment capacity, etc.
Once satisfied with your application, the issuer will then decide on the credit limit. Remember that all credit cards will not have the same limit, depending on this logic. The issuer’s policy and your credit history determine that.
How to increase your credit card limit?
Now that you are aware of the facts that go into deciding your credit limit, here are some ways you can also increase it –
1. Apply for a new credit card
If you want to increase your credit card limit, you can apply for a new credit card with a higher credit limit. Being a responsible borrower, companies won’t mind issuing you another one. However, do check out the eligibility parameters to avoid rejection.
2. Request for an increase in credit card limit
Another way to increase the credit limit is to request your bank to do so. If the bank or the financial institution finds you a risk-free or low-risk borrower, they might increase your existing card’s limit. But your income, credit history, and credit score will also be checked, to improve on all of these factors.
3. Pay your dues on time
If you want to get the most out of your credit card limit, you must repay your dues on time. This will help to increase your credit limit as well. Being diligent here will have a lot more benefits than just a bump in the credit limit.
Clearing your due on time is a healthy practice, showcasing your sense of responsibility. It will show that you are a responsible person who pays the installments on time. This will help you in amplifying your credit limit.
4. The annual increase in the credit limit
Every credit card company increases the credit limit on an annual basis.
You might not require it, but it is very beneficial because, in return, your credit score will increase. Also, you will get many bonuses, rewards, and offers for being a good credit card user.
Tips for getting the most out of your credit card
Here are some tips on how to get the most out of your credit card –
• Use the card for the right reasons
The first point to remember here is that if you want to make the most of your credit card, you must be conscious about its usage. Since the credit utilization ratio plays a part in deciding your credit score, being cautious here is essential.
Thus, refrain from using your credit card randomly and plan your purchases with it to avoid accruing additional debt.
• Be aware of the offers and bonuses available
Another easy way to maximise your credit card benefits is by using the offers and benefits to your advantage. The credit card provider will have various offers and deals that you can make the most of. So, keep a tab on these limited-time offers to increase your savings.
• Redeem the reward points
Redeeming the reward points is another way to maximise your credit card. You accumulate these points with regular usage and can later redeem them for more benefits. For instance, you can use these points to earn discounts on hotel bookings, settle your monthly credit card bill, and a lot more.
Hopefully, now you know how to make the most of your credit card limit. Doing so is essential as it helps in various cases. An extended credit limit gives you the freedom to meet a host of monetary requirements without any hiccups. Having said that, you must remember that you are responsible for repaying it as well.
To sum up, an improved credit limit is beneficial, but if you are not diligent, it can soon become a burden that is not easy to get rid of.