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A credit card is one of the best financial products, provided you use it wisely. If not, you end up paying unnecessary charges. Whether you are an experienced user of this banking facility or willing to apply for a credit card for the first time, you should understand and adopt the best practices. Credit cards can either be immensely advantageous or incredibly harmful, depending on how you use them.
One of the most vital aspects to understand about your credit card is your credit limit. It is the maximum outstanding balance you could have on your card at any given point in time without attracting a fine. The effective management of a credit limit is crucial for establishing a better credit score and staying out of dues. If you are conjecturing what the credit limit is for your credit cards, refer to your billing statement, log into your online account, or dial the customer care number.
How is the credit limit set for you?
Credit card companies fix the credit limit for you by evaluating your earning potential, the present financial position and credit history. If you have a history of late payments, a new credit history, low earnings or a high debt level, you may have to begin with a low credit limit. Your credit limit cannot be the same throughout your lifetime. If you are willing to enhance it, you can. Here are a few tips for you.
1. Use credit cards for foreign traveling
Credit card companies charge an overseas currency markup fee up to 3.5% for overseas transactions. This is a prime source of income for them. Owing to this reason, overseas commuters are special customers for credit card lenders. If you are a frequent overseas traveler, you are a valuable customer and obviously deserve a good credit limit.
2. Apply for a credit card with higher credit limit
You can apply for a credit card with the same lender or other lenders to get more credit limit and it is the simplest way. In most cases, new credit cards are offered with higher limits. You can apply for a credit card online. The approval of a new credit card shall merely rely on the CIBIL credit score and your current earning potential. Sometimes, using multiple credit cards can impact your credibility.
3. Requesting for limit increase
The most commonly used practice to improve your credit limit is by requesting a hike for it. You can do so by speaking to customer care service representatives and file a request online. The credit limit is redefined on the basis of your present income and credit score. It can be extended if the observations are positive.
4. Increase your security deposit
Obtaining a credit card against fixed deposits in India is the simplest way to increase the credit limit on a secured credit card. For secured credit cards, the credit limit is determined as the percentage of the fixed deposit. Pledging additional security against credit cards can also increase the credit limit.
5. Credit card upgrading
Ask your banker if you are qualified for the upgrade of your current card to the next level card. The customers who have a better payment history are permitted to upgrade their credit limit. With an upgraded credit card, the credit limit increases.
6. Use your card regularly
Make sure to use credit cards regularly if you intend on enhancing your credit limit. If you use your credit cards once in a while, it seems like you do not require an increase in the credit limit.
7. Submit your income increment
Earning potential is the most dominant consideration in determining the credit limit. The earning potential of an applicant indicates the possibility of credit bill payments.
8. Request limit increment only for your best credit cards
Do not request a limit increment for all cards. If you do, card issuers will verify credit reports. This enquiry may cause a temporary dip in your CIBIL credit rating and will decrease the chances of getting limit increment.
9. Build credibility
Build credibility by making payments on time and be loyal to your banker. This will definitely help you gain the additional credit limit on your card.
10. Make payments in time
Make sure to pay credit card bill on time in order to avoid interest and late fees. By constantly missing payments, you can end up remitting late payment charges. Moreover, your credit score is negatively impacted and you need to continuously monitor your credit card status.
11. Understand the billing cycle
All credit card companies in India shall issue a statement with two dates: the billing date and the payment due date. The billing date indicates the date on which the bill was generated. New transactions beyond this date will go on to the subsequent month’s statement. The payment due date tells you when the payment for the specific billing cycle is due.
12. Make 100% payment
Remitting your credit card payments in full is enormously important for utilising a credit card intelligently since it permits you to both avoid interest and develop a high credit rating. All credit card companies in India compute interest on an average daily balance.
13. Maintain an optimum credit utilisation ratio
It is essential to keep your balance low relative to your existing credit limit. Maintaining a small balance offers two significant benefits: 1) low balances help you increase your credit rating and 2) you are more likely to pay off your balance in full and on time.
14. Monitor your monthly statement
Monitoring your monthly statements continuously helps you check for fraud, maintain a low balance, and stay on a budget. Even if you have set up an automatic payment, you are still advised to log in and monitor your monthly statements.
Bottom line
These are the tips for people looking to enhance their credit limit and obtain a good deal on the best credit card in India. The credit limit is fixed for every credit card and can be enhanced after a certain period of time. These pointers are applicable to all types of credit cards, be it a lifetime free credit card, a premier credit card, or a zero annual fee credit card.
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