Credit Card: Is It Beneficial to Increase Credit Card Limit? Loss

Are you using a credit card? Are you getting calls from the card issuing company to increase the card limit? Are you thinking whether to accept this offer or not? But this is for you. Banks for new credit card holders They grant cards with lower credit limits. The credit limit is increased by taking into account the payment behavior of the card holder and income growth.

Issuance of card to increase credit limit Even if the companies come forward, many people reject this offer because of the fear of spending too much and getting caught in the debt. Trap. And are the consumer's fears about credit card limit increase true? Is it beneficial to increase the limit? Loss?

Benefits of increasing credit card limit

Credit score can be boosted by

Credit Utilization Ratio (CUR) is one of the important factors that credit bureaus take into account while calculating credit score. CU informs the credit cardholder how much has been used within the assumed limit. A CUR exceeding the 30 percent level means that your expenses are exceeding the limit. If this is happening often, the credit bureaus will lower the credit score, thinking that the chances of debt evasion will increase. A CU of less than 30 percent is required to improve credit score.

If your card issuing company has already given you an offer to increase your credit card limit, it is better to accept it. Or take out a new credit card.For example, let's say your credit card limit is one lakh rupees. If you spend Rs.45 thousand using credit card every month.. Then your CU will be 45 percent. Now if you increase your credit card limit to Rs.1.50 lakh CUR will be reduced to 30 percent. CU will be 30 percent due to availability of additional limit of Rs.50 thousand. It will not have a bad effect on your credit score.

In financial trouble..: Credit card limit increase can help you with the extra amount as an emergency fund. Helps in financial needs arising due to loss of job, illness, etc. It solves the problems of lack of funds and liquidity. High loan can be availed: If the credit card limit is high then high loan can be availed on the credit card. Card issuing companies offer these loans only to select customers. This type is only for those who have a regular history of expenses and payments.

Banks generally provide these loans to customers on the same day of application. So, increasing the limit will allow for higher loan amount in emergencies.

Losses..

Debt Burden May Increase: Increasing credit card limit means more amount available for consumption. If you spend more than you need, it will be difficult to make payments. So many people pay the minimum amount The remaining amount is deferred to the next month. This will burden the debt to be paid with interest and finance charges.

Credit score can go down: Credit card bill is on time. Failure to pay will lower your credit score. Limit Credit Score Lower: It doesn't matter if the credit card bill is high on time. As long as the spending is within the limit. But if the expenses are high and the bill is not paid on time, the credit score will decrease.

High interest: Banks offer interest free period to credit card users. The full amount used is to be repaid on time every month. If not repaid.. Interest from next day. Applies. Annual interest varies from 36 percent to 48 percent depending on the institution. Interest free period benefit may be lost for new purchases.

If you lose your credit card or fall into the hands of a cyber fraudster, the loss can also increase.

Finally: As long as the credit card is used responsibly, there is no gain or loss from increasing the limit .It is better not to increase the limit for those who do not have control over the expenses and are not aware of the credit card usage.