Credit card companies offer a lower credit limit when you first issue a card. Taking into account cardholder transactions, bill payment on time and monthly income.
Credit Card Limit :Banks that issue credit cards initially give their customers a limited limit card. Offer to increase the credit limit by taking into account cardholder transactions, timely bill payment, and monthly income. Before raising the credit limit, banks want to know how the customer is behaving in repaying the credit.
If you use the credit card properly and pay the bill on time, there will be a good offer from the banks to increase the limit. But raising the limit is not the only benefit. It is important to know that it is also a negative.
You may think that increasing the credit card limit will give you convenience and increase the options for purchasing from the card. Would you accept such an offer? At? Many people are confused as to whether. The main risk of raising the credit limit is also the risk of getting caught in a debt trap.
There is also the fear of getting into debt if you take too much of the credit limit. However .. If the limit is low, it is not possible to spend more. For some, however, a high credit limit proves to be a lucrative deal. In this context, let’s look at some of the pros and cons of raising a credit limit.
The Benefits of Raising a Credit Limit
If more than 30 per cent of the credit limit is used .. Credit bureaus assume that the cardholder has high cash requirements. The credit utilization ratio (CUR) is seen when calculating the credit score. Shows how much the CUR cardholder uses the credit limit. CUR 30 means .. The more you use the card, the lower the credit score.
Increasing this percentage increases the chance of default. The Credit Bureau lowers the credit score when the CUR level rises by 30 percent. This further reduces the limit. This problem will not exist if the credit limit is increased. For example, if your card has a credit limit of Rs 1 lakh, it is 30 per cent, which means that if you use more than Rs 30,000, the score will go down. However, it is advisable for companies to increase their credit limit.
Unfortunately when you lose your job, you have to go to the hospital, you suddenly need money when an accident happens. Cards with higher credit limit will support us at such times. No need to ask anyone for a loan. It is not possible to pay the entire bill but they can pay some money through EMIs per month. There will be no problems like falling of fines and decrease in score. However, bills must be submitted by the due date. Otherwise there is a chance that it will become dangerous in the future.
Chance of borrowing more
Banks offer large loans to cardholders with high credit limits. These are pre-approved loans so the money will be credited to our account in minutes. No documentation, no securities required. However, such offers are only available to those who pay their card bill by the due date. It is difficult to get a loan if you do not have a good credit record.
Losses if credit limit is increased ..
Whether the credit limit is high or not, there is a chance that the debt will increase if you spend as much as you like. As the credit limit grows, some people spend more than ever before and get into trouble. The card should not be used beyond our income unless absolutely necessary.
Companies pay hefty interest if the amount used is not paid. Must pay at least 12% interest even if paid under EMI policy. The higher the EMI, the higher the interest rate and the lower the credit score. Whenever possible you should have all of these components in place for launch to maximize profits. So cardholders with higher credit limit should be more careful.
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