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    Benefits of Increasing Your Credit Card Limit

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    Overview:

    Credit Limit is a term that specifies the maximum amount of money that a credit card holder can borrow from the bank using their card. This limit is set by the bank based on the income details cardholders provide during the application process, their credit score, monthly salary, etc. People can use this limit for their online and in- store purchases, paying bills, withdrawing cash (depends on the limit set by the bank on cash withdrawals), etc.

    The credit limit is revised periodically depending on various factors such as monthly card payments, credit score and income. If cardholders have a good record, then banks tend to increase their credit limit. Some people consider a high limit to be a bad thing, but it is not so. A higher credit limit has its own benefits.

    Benefits of Increasing the Credit Card Limit:

    • Low credit utilization – Increasing the credit limit lowers the amount of credit you will be using. For example – If your credit limit before was Rs.1, 00, 000 and you used only Rs.50, 000, it means you were using only half of it. Say, after the increase, the credit limit was Rs.1, 25, 000, but you continued to use only Rs.50, 000, which is not half of the limit thereby reducing your credit utilization.

    • Increase in the credit score – When you use less credit than the limit assigned to you, your credit score increases as there is a decrease in your debts. If you use an amount lower than your credit limit, it implies to the financial institutions that you are financially secure as you are spending less than you can and it assures them that you will make your credit card payments.

    • 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. Owning one card makes it simple for the cardholder to keep a track on his or her card activities and they can use it accordingly. Also, cardholders save on the extra charges that they would have to pay separately for each of the cards, if they own more than one credit card. Owning one card with a higher limit will also ensure them a good credit score as opening more than one credit card account can reduce credit history. The older your account, the higher your credit score.

    • Easier to Get Loans – If you have a high credit limit, the banks consider you to be safe, making it easier for you to get loans from them. Your increased credit limit tells banks that you can be trusted with their money. Also, a higher credit limit can also result in a high credit score (as mentioned above) and a high score can help you get low interest rates on your loan. So, while negotiating for a loan, credit cardholders can use their high credit limit as a reason to get a good deal.

    • More Rewards – If you have a high credit limit, you can spend more using your credit card. If you are someone who always pays their full credit card bills on time, you should charge your purchases to your credit card to earn more rewards. Also, if your bank has increased your credit limit, it means that they consider you an important customer and may offer you more reward points and benefits. The rewards can help you in reducing your other spends such as airline tickets, gifts, etc.

    • Helps during Emergencies – A high credit limit on your credit card can help you when you are stuck in a situation when you need funds urgently. If you have a high limit, you do not have to borrow money from another individual or opt for a loan. Also, if you wish to take a loan, then your limit will help you get a high amount of loan from the bank at good rates.

    These are some of the benefits of having an increased credit limit. Also, an increase in the limit means that you have been identified by banks as a cardholder who manages your finances well and are a very responsible person.

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