Reasons Why Individuals Should Opt For A Higher Credit Limit

Many credit card issuers be it banks or financial institutions offer cardholders increased credit limits on their existing cards. This is being offered on the back of consistent spending and repayment records as well as based on steady increase in income. However, cardholders have not taken brought the idea as they are apprehensive of falling into a debt trap.

Here, we take a look a how an increased credit limit can be helpful to cardholders in managing their finances well in today’s world:

• Higher reward points and other card benefits: Higher credit limit helps an individual to make higher credit card transactions. This helps in saving more courtesy discounts, cashbacks and reward points. These offers help in reducing the overall transaction costs by a significant margin. The best part is that all of these comes without hurting the credit score of the individual.

• Higher credit score: Increased credit limit helps the cardholder in reducing the credit utilization ratio. Credit utilization ratio denotes the proportion of the total credit limit that the individual uses. It is necessary to keep an eye out on the credit utilization ratio as credit bureaus consider it while calculating the credit scores of the cardholders. Breaching 30-40% of the credit limit can result in low credit scores, so to evade that requesting increased credit limit is a good alternative.

• Higher loan amount against the credit card: Another benefit of increased credit limit is that individuals can avail a higher loan amount against the credit card. Apart from enabling the cardholder in availing a higher amount as ‘loan against credit limit’, it also helps the cardholder having a spare limit for further credit card usage. Most credit card issuers offer pre-approved loan against credit card to card holders who have a good repayment history. The added benefit is that the amount is disbursed to the cardholder within the same day of application.

• Offers enhanced capacity for making big-ticket card spends: With many credit card issuers waiving off joining and annual fee and offering free vouchers or air tickets for spending above the predetermined amount, cardholders earn incremental reward points. Given this, a higher credit limit will help the cardholder in increasing the overall capacity of making credit card transactions. Apart from that, cardholders who have a good history of credit card repayment can convert the big ticket spends into Equated Monthly Installments (EMIs) at attractive rates.

• Prepared to deal with financial requirements: Increased credit limit is helpful in dealing with financial crisis as it helps them in withdrawing huge amounts from the ATMs. Cardholders can also avail larger pre-approved loans against the credit card if they are eligible.