Santa Claus comes around just once a year. In the meantime, there are Credit Cards.
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    Learning about credit limits could be confusing. But it isn’t impossible to do so. To put it simply, the credit limit on your card is the maximum amount that you can spend on your card without you being charged any penalty.

    What is a Credit limit?

    Credit limit, as the name indicates, is the purchase limit set by the credit card company or a bank on a particular credit card. The limit, which is usually in terms of money, is the maximum amount the user can spend using the credit card.

    For instance, if your bank provides you a credit card with a limit of Rs.50,000, you cannot spend beyond that amount on your card.

    The credit limit varies based on the type of credit card and is determined based on the customer’s eligibility.

    Know All About Credit Card Limit

    How do Banks Determine Your Credit Card Limit?

    When you apply for a credit card, your bank determines your credit limit. This is done by taking multiple factors into consideration. These include:

    • Your annual income
    • Your age
    • The debt you currently have
    • The amount of credit in your name
    • Your employment status

    And most importantly, your credit limit is determined by:

    • Your credit history
    • Your credit score

    If the card you are applying for is your first credit card or you don’t have any credit to your name, chances are that your credit card will have a low credit limit. This is because the bank doesn’t quite know if they should take a risk on you or not.

    The good thing is that a low credit limit doesn’t stay low for a long period of time. If you use your card often and make your payments in full and on time, the bank will give you the option to increase the credit limit on your card.

    Difference Between Total Credit Limit and Available Credit Limit

    If you have scrutinised your statement, you will see that there are two limits mentioned – your total credit limit and your available credit limit.

    So, what exactly are these?

    Your total credit limit is the amount above which if you spend, the bank will charge you a penalty. This is basically the same as the credit limit mentioned early on.

    Your available credit limit, on the other hand, is the amount you currently have available to spend.

    Example:

    Let’s say that you have a credit card from Bank A with a total credit limit of Rs.50,000. This means that you can spend up to Rs.50,000 using your credit card. Now, let’s assume that in a given month, you spend Rs.28,000. The available credit limit is now Rs.22,000.

    This means that of the Rs.50,000 credit limit, you have spent Rs.28,000. So, you can now spend Rs.22,000 more before you reach the credit limit.

    When you make payments each month, your credit limit increases by that amount. And so does your available credit limit.

    If you take this example into consideration, let’s say that you pay the Rs.28,000 that you owe. Your total credit limit is still Rs.50,000, but this time your available credit limit is also Rs.50,000.

    Why Your Credit Limit Matters

    You now know what your credit limit is. This information should be enough for your day-to-day credit card related transactions, right?

    Well, not quite.

    Remember that all-important credit score? Well, your credit limit indirectly ties into it.

    It ties into it with the help of a widely used ratio which is used to calculate the current amount you owe on your card compared to the total credit extended to you and is expressed as a percentage.

    The formula for the same will be:

    • Credit utilisation ratio = (Outstanding balance on all credit cards/Total credit extended on all credit cards) x 100

    It is generally advisable to keep your credit utilisation ratio under 30%.

    What Does This Ratio Mean?

    Your credit utilisation ratio, as the name suggests, looks at how much of the available credit you tend to use. If your utilisation ratio is high every month (i.e., the amount you spend is close to your total credit limit), lenders tend to think of you as credit hungry. They also slate you as someone who is not able to manage their finances and hence may default on a payment.

    This, in turn, leads to a reduction in your credit score making it that much harder for you to get a loan.

    A low credit utilisation ration, on the other hand, means that you not only know how to manage your finances, but you will in all probability pay your bills in full and on time. From a lender’s point of view, you are someone they can hedge their bets on. In other words, a low credit utilisation ratio will lead to an increase in your credit score. This makes it more likely that if you are to apply for a loan, your loan application will mostly be approved.

    Using an Example to Understand Credit Utilisation Ratio

    Let’s use the earlier example again to better understand this:

    Your credit card from Bank A comes with a total credit limit of Rs.50,000. In the month of May, you charged Rs.35,000 to your card. Nothing wrong in that since it is within the credit limit.

    The credit utilisation ratio, however, is 70% [(35,000/50,000) x 100]. This is much higher than the advisable percentage.

    This high credit utilisation ratio could adversely affect your credit score.

    How to Increase Credit Card Limit

    Now that you know how important your credit limit is, the question to ask is how do you increase the credit limit on your card?

    • Use Your Card: If you use your card regularly and pay your bills in full and on time, the bank will automatically increase the credit limit on your card.
    • Provide Your Income Statement: There could be a case where your income has increased, and you are still using your old credit card. In such instances, you could approach the bank with your latest payslips and request for a credit card upgrade along with an increase in the credit limit.
    • Request to increase Credit Limit: If you send a request to the bank to increase your credit card limit, most banks agree to do so depending on the reason you have provided for the request. You can raise a request to increase the limit through netbanking or visit the branch of the bank.
    • Apply for a New Card: You could also consider applying for a new credit card which comes with a higher credit limit than your current card. In fact, if you have been making payments on time on your current credit card, you shouldn’t find it too difficult to get approved for a card with a higher credit limit.
    • Pay Your Bills on Time: If you are regular and timely in paying your credit card bills, your credit score can increase, and the bank will see you as a responsible cardholder. This often results in banks offering you a higher credit card limit.
    • Be Patient and Wait: If you hold a credit card long enough, the bank will automatically increase the credit limit on it. The only downside to this method of increasing your credit limit is that you need to be patient and wait.

    Benefits of Increasing the Credit Limit on Your Card

    You probably already have surmised some of the benefits of increasing the credit limit on your card, but here they are just so you know how an increase in your card’s credit limit can help you:

    Lowers Your Credit Utilisation Ratio: You probably already know this. But the importance of maintaining a low credit utilisation ratio cannot be stated enough. The lower the ratio the higher your CIBIL score.

    Makes It Easier to Get Loans: A high credit limit that you do not use makes banks and lenders look at you more favourably. Thus, getting approved for a loan becomes that much easier.

    Helps During an Emergency: A higher credit limit always comes in handy during a financial or a health emergency.

    Access to Perks: Most credit cards that come with a high credit limit also come with many perks such as airport lounge access, membership to hotels, etc.

    FAQs Related to Credit Card Limit

    What is the average credit card limit?

    Your credit card limit is based on a number of factors such as your income and your CIBIL score. As such, each person’s credit limit will differ.

    Can I increase my total credit limit?

    Yes, you can request your bank to increase the total credit limit on your card.

    What happens if I exceed my credit limit?

    If your transaction is not declined, you will be charged an overlimit penalty.

    How long does it take to increase the credit limit on my card?

    Ideally, if all your documents are in place a credit limit increase shouldn’t take more than a few days. However, this could differ from bank to bank.

    Does an increase in my credit limit affect my CIBIL score?

    An increase in your credit limit without a simultaneous increase in your expenses will lead to a lower credit utilisation ratio. This, in turn, may help in improving your CIBIL score.

    Is it good to accept an increase in my credit limit?

    Yes, it is good to accept an increase in your credit limit because it means that the bank trusts you with credit. As such, other lenders are likely to trust you with credit as well.

    Why was my credit limit increase denied?

    There could be many reasons why your credit limit increase may have been denied. Low income, decreased utilisation of credit card or default payments are few reasons.

    Should I reduce my credit card limit?

    In general, reducing your credit card limit without also reducing how much you charge to your card is not a good idea. However, if you believe that a higher credit limit will only tempt you to spend, then do request for your limit to be reduced.

    Can banks decrease my credit limit?

    Yes, your credit limit can be reduced by the bank. This is generally done due to low usage or if you have missed/defaulted on your payments multiple times. If you find that the credit limit on your card has been decreased, do call your card issuer and request for an explanation.

     
      

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    Credit Card EMI Reviews

    • IndusInd Bank Credit Card
      "Good service"
      0.5 4.0/5 "Great!"
      INDUSIND bank has offered a credit card with EMI conversion options with the interest rate 14 to 16%. It is a life time free credit card. The credit limit offered from bank is okay but I expected higher limit. Airport lounge access facilities are not available, it would be better if this options is there.
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      , bangalore
      Reviewed on Jan 24, 2020
    • ICICI Bank
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      "Best card for movie"
      0.5 4.0/5 "Great!"
      I am using ICICI Coral credit card which was applied through bank and i am using this card more than 8 months . Annual charges for this card is Rs. 500 if i spend Rs.1.50L in a year no need to pay . Customer service was not so good which is okay and also I am getting movie offer.
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      , kolkata
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    • SBI Cards Credit Card
      "Best for online shopping"
      0.5 4.0/5 "Great!"
      I am using SBI credit card and the documentation was simple executive collected from my door step and i received this card almost 1 month. I am not happy with the credit card, and the annual charges is Rs. 500 if i spend Rs. 1.50L within a year no need to pay the charges and service was good.
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      , kolkata
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    • YES Bank Credit Card
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      I have called the customer care service of YES bank its really good service.Documentation process was good and i received this card within 20 days. Annual charges for this card is less and also need to increase the credit limit. Customer service was good so far.
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      , bangalore
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    • IndusInd Bank Credit Card
      "Need to improve the services"
      0.5 4.0/5 "Great!"
      I applied for Indusind credit card through online and received the card with in a week . I have a credit limit of 50K but I expected higher limit. It is a life time free credit card. The charges are basically high in this card. I requested for the visa card but bank provided me with master card.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 24, 2020
    • IndusInd Bank Credit Card
      "Good servcie"
      0.5 5.0/5 "Blown Away!"
      I have applied INDUSIND Bank credit card which was applied through online and they had approved my credit card within a week. Documentation process was done through online it is really good. Customer service and responsiveness was very good .
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 24, 2020
    • SBI Cards Credit Card
      "Best card"
      0.5 5.0/5 "Blown Away!"
      I have SBI credit card which was chosen for shopping purpose through bank applied .The credit limit was good and using this credit card for the past 7 years, previously was a chargeable now they given free card. Customer service and response was good.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 24, 2020
    • IndusInd Bank Credit Card
      "Good service"
      0.5 4.0/5 "Great!"
      I applied for Indusind credit card through online and received the card with in 15 to 20 days. I have not opted for any EMI conversion and not aware of interest rate. It is a life time free credit card. The credit limit offered from bank is 50K which is sufficient.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 24, 2020
    • SBI Cards Credit Card
      "Good Card"
      0.5 5.0/5 "Blown Away!"
      Its because of the good offer, i have selected the credit card from SBI. I will be getting a reward points based on my purchase. As a joining benefits, i will be getting a e-voucher from Amazon website. I got the credit limit of Rs. 1 lakh. I need to pay the annual fee of Rs. 500 and it will get waived off if i do certain amount of transaction.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 24, 2020
    • Kotak Credit Card
      "Best card"
      0.5 5.0/5 "Blown Away!"
      I am having Kotak Mahindra Urban credit card hence they have provided me a free card. Basically, this card as much benefits like movie ticket offer buy1+ get1 movie ticket offer, rewards and cash back. Already I have an account with this bank so I applied for the card and also they given a good limit Rs. 1.80L.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 24, 2020
    • IndusInd Bank Credit Card
      "Best free card"
      0.5 4.0/5 "Great!"
      Indusind Bank mobile app is sometime lacked and I have availed this credit card through online .The credit limit was 50,000. I have got the credit card on time without any delay. This was a life time free card and no difficulties faced so far. I have submitted the documents through bank agent .The process was done very quickly .
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 24, 2020
    • IndusInd Bank Credit Card
      "Easy processing "
      0.5 4.0/5 "Great!"
      I am using INDUSIND Bank credit card which I am having for the past 3 months and I had applied through online. This was a free card and yet to use it. I have uploaded documents through online within a week I have received this card. The customer service was average.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 24, 2020
    • IndusInd Bank Credit Card
      "Good service"
      0.5 4.0/5 "Great!"
      I am holding INDUSIND bank credit card. I use to get cash back benefits for fuel and online shopping. EMI conversion options are available. I have a credit limit of 50K which is sufficient. The customer support response is good. I use mobile app which is user friendly, I can view all offers for my card.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 24, 2020
    • IndusInd Bank Credit Card
      "Good service"
      0.5 4.0/5 "Great!"
      I have applied INDUSIND bank credit card through online and received the card on time. The rate of interest is high compared with other bank. I am happy with the credit limit. It is a life time free credit card. EMI conversion options is not available
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 24, 2020
    • HDFC Bank Credit Card
      "Extraordinary "
      0.5 4.0/5 "Great!"
      I have a credit limit of 30K in my HDFC credit card. I had a offer on limit enhancement but I am not interested in it. Since I have a account with this bank, so they offered me with credit card. It is a life time free credit card. I have not faced any issue with this card till now.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 24, 2020
    • Citibank Credit Card
      "Very Good Card"
      0.5 5.0/5 "Blown Away!"
      CITI bank is providing me a lots of offers so that i opted the CITI bank. In shopping, they are giving some discounts, movie ticket offers. I'm using the rewards card in that i get 1 reward point for every Rs. 100 i spent. I called the customer care service while activating the card and they were supportive. I have applied the EMI but there was no proper explanation of the charges and there is no option to check the same on their net banking.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 24, 2020
    • IndusInd Bank Credit Card
      "Excellent service"
      0.5 4.0/5 "Great!"
      I applied for Indusind credit card through online. The mobile application is very useful for transaction and can view all the activities done on credit card. Credit limit offered from bank is sufficient and it is 60K. I get notification on time regarding the payment and offers.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 24, 2020
    • Kotak Credit Card
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I applied for Kotak credit card through online and received the card with in 15 days. I get buy 1 get 1 movie tickets offer. I have a credit limit of 50K but I expected more than a 1L. EMI conversion options are available but I have not opted it. It is life time free credit card.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 24, 2020
    • IndusInd Bank Credit Card
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I applied for Indusind credit card through online and received the card with in 15 to 20 days. I have not faced any difficulties in process. The credit limit offered from bank is only 50K but I was expecting above a lakh. The billing cycle is convenient.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 24, 2020
    • IndusInd Bank Credit Card
      "Good servcie"
      0.5 5.0/5 "Blown Away!"
      INDUSIND bank service is good and received the card with in 5 days. It is a life time free credit card. The bank offered me with the good limit around 50K. I am getting rewards benefits , dining, cash back and more and also i have utilized that over all it is a good bank.
      Was this review helpful? 0
      , kolkata
      Reviewed on Jan 24, 2020
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