Is It Time to Boost Your Credit Card Limit? Here’s How To Decide

Using your credit card properly lets you extract its benefits while also allowing you to maintain your financial responsibility. As such, a person using a credit card needs to understand credit card management in order to recognise the right time for credit limit increases.

In most cases, credit card companies initially offer a nominal credit limit and later offer enhancements depending on usage and other factors. However, one can also request to enhance the limit or accept the limit enhancement offer from the company in a few circumstances. Let’s explore them.

1. Increasing Your Purchasing Power

The first and foremost benefit of increasing your credit card limit is that it enhances your purchasing power. So, whenever you find that your earning capacity has increased and correspondingly, it is time to increase your purchasing power, you can consider requesting a credit limit extension.

Says Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution: “A higher credit limit means you can make larger payments and purchases when needed, provided you can afford to pay it back. Once the limit is increased and you use it responsibly while paying on time, it demonstrates your ability to manage debt and helps build your credit eligibility.”

2. When Your Credit Card Spending Is High

When you have a low-limit credit card, there are chances that you may exhaust the limit or use 80–90 per cent of the available credit limit. However, such a high ratio of credit utilization can negatively impact your credit score.

“Ideally, to make a positive impact on your credit score, you should limit your credit card spending to between 30-50 per cent of the available limit. Enhancing your credit limit substantially above your regular spending can help you maintain a good credit score,” adds Kapoor.

3. When Your Emergency Corpus Is Low

Another reason to increase your credit card limit is when you have a low emergency corpus. Ideally, you should have at least 6-12 months of monthly expenses as an emergency fund. If you are short of this amount, increasing your credit card limit can provide a financial cushion in case of emergencies.

4. Life’s Unexpected Twists

Life has a way of surprising us with unforeseen events that appear without warning. A higher credit limit provides financial protection for unexpected costs and urgent situations that arise without warning.

5. Making the Most of Rewards

Everyone enjoys receiving rewards in some form. Credit cards provide cashback benefits alongside travel rewards, but you need sufficient credit limits to fully use these rewards. Increasing your credit limit becomes necessary when you want to maximise your rewards, but your current limit restricts you.

6. Keeping Tabs on Your Finances

Regular communication and check-ins form essential components of relationships and your credit card relationship follows the same principle. Regular credit limit reviews help you evaluate your financial requirements. The process also allows you to verify all credit card proceeding correctly while enabling necessary changes.

7. Staying Responsible

Credit limit increases tend to be approved when you demonstrate responsible spending habits and maintain timely bill payments. Building trust requires you to demonstrate your capability to manage the situation.

The process of requesting a credit card limit increase requires thorough evaluation because it represents a significant financial step. Understanding your financial position will help you to enhance your credit card relationship while maintaining financial wisdom.