Credit Card Limit: Do you want to increase your credit card limit? Then know this thing!

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The use of credit cards has increased everywhere these days. Credit card customers with a good CIBIL score often get offers from banks to increase their credit card limits. In such a situation, it is important to know what are the advantages and disadvantages of credit cards.

Can Improve Credit Score

Credit Utilization Ratio (CUR) has a major impact on credit scores. Your credit utilization ratio depends on how much you use your credit cards. Generally, credit card companies consider a credit utilization ratio over 30 percent to be a sign of bad credit. Hence increasing your credit limit can improve your credit score.

That is if your credit card limit is Rs 1 lakh and you usually spend around Rs 50,000 every month. So your credit utilization ratio would be 50 percent. Now if you increase your credit limit to Rs 1.7 lakh, then your credit utilization ratio will be 29 percent.

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Will get benefit in economic crisis

Increasing the credit limit helps in dealing with financial crises. It can act as an emergency fund in case of a financial crisis like job loss, illness, accident, disability, etc.

Chances of getting more loans

An enhanced credit limit can help you get more loans. These limits are usually offered in lieu of the credit limit of the credit cardholder. Credit card loans are usually pre-approved.

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Fear of getting into debt

After increasing the credit card limit, you can spend more, but if it is not used properly, you can get trapped in a debt trap. If you do not pay your bills every month, you may have to pay higher interest on your overdue amount.