All You Need To Know About Increasing Credit Card Limits

One of the key components of the usage of a credit card is the credit limit that is present on the card. The higher the limit the better it is for the individual using the card, as they can make larger expenses on it without having to look for alternative avenues, especially when it comes to expenses like international airline tickets, hotel bookings etc.

This can also cause a bit of problem if the spending is done without any planning for paying back the amount. One feature that several banks have been adopting is to offer their customers a higher credit limit. Such offers need to be analysed on various parameters before making a decision.

One of the first things to consider by an individual is the existing limit that is present on the credit card along with the hike that has been offered. If the existing limit is low and the hike is a good percentage, then this becomes a viable offer that can be considered. For example, if the existing limit is Rs 2 lakh and this is being offered to be raised to Rs 2.5 lakh, then it is a notable rise.

Sometimes, the figure might just cross a threshold that the card user might find useful. If the existing limit is Rs 4.5 lakh and this is being raised to Rs 5.25 lakh, then the percentage rise might not be high but it might help the card user because they could make spends going over Rs 5 lakh. This could give convenience of using a single card instead of spreading out the expense between multiple cards. The situation has to be seen from the point of view of the cardholder and whether this suits their needs.

The next part of the process involves looking at the process for getting the benefit of a higher credit limit. The best situation is where the bank is allowing this without any additional documentation and income proof. They could be doing this based on the usage of the card and the repayment history or the relationship that they have with the cardholder. Here, there is no additional effort required from the cardholder and this leaves the decision to be made on whether the higher limit is required or not. On the other hand, if there are a lot of documents, like income proof and other details to be submitted, then the decision would be based on benefits offered and the effort involved. If there is no immediate or urgent need for a higher limit, then the attractiveness of the hike might be diminished.

The cost for the entire activity also needs to be considered before coming to any specific decision. In many cases the bank would not charge for the higher credit limit and the process to get this increased. This is beneficial for the card user because they do not have to bear any expenses in case they decide to go for it. On the other hand, if there is a charge involved then the individual will have to check whether the effort is worth the cost along with the benefits that come along with this. Many banks do charge a processing fee for such upgrades, so this needs to be checked before a decision is made.

The overall way to analyse this situation is to look at such offers both in terms of need and the cost involved. If there is no need for a higher limit then such offers can be ignored. Also, the higher limit should not be used to spend higher or recklessly, which can then lead to a strain on the finances. If there is a real need for convenience when spending using credit cards, then the higher limit can turn out to be boon.

Arnav Pandya is founder Moneyeduschool