When Should I Get My Credit Card Limit Increased Or Reduced?

If you are a credit card holder, then you must be aware of the available credit limit on your card. But can you request to increase/decrease the credit limit? Sometimes, the card issuer bank sometimes boosts the credit limit of certain cardholders. When the credit limit increases or decreases, it might impact the cardholder in various ways. This article will discuss how credit limit change can impact cardholders and the right time to change the credit limit. 

What is a Credit Limit?

A Credit limit is the maximum credit amount approved by the issuer bank under your name. You can either maintain the max outstanding balance per the given credit limit or spend it accordingly. At some point, you might want to increase/decrease the limit. 

The Relation Between Your Credit Limit And Credit Score?

Your credit score is a numerical analysis of your credit history that determines your creditworthiness. Cardholders with higher credit scores can quickly increase their credit limit based on past credit utilization. Generally, cardholders with a 10 to 30 percent credit utilization ratio maintain a high credit score.

When you increase/decrease the available credit limit, it can actually impact your credit utilization rate/ratio. If your credit utilization ratio gets high, it can negatively impact your credit score. Increasing the credit limit also lowers the cardholder’s credit utilization, helping to maintain a healthy credit score in the long run. 

Here are some tips for maintaining a good credit score:

  • Minimize credit limit usage.
  • Make on-time credit repayments.
  • Find alternatives to replay the remaining early.
  • Decrease additional liabilities.

Ways Of Increasing Credit Limit:

If you want to make the most of the credit card limit increase facility, you’ve got two options:

1. Make A Request To The Issuer Bank:

You can request the credit issuer bank to increase your credit limit. You can either visit the credit issuer bank or submit the request online. Most issuer banks accept a credit limit increase/decrease request based on the cardholder’s reasons. If you have decided to change your credit limit, you must consider the following points:

  • Request for the credit limit increase at the right time. Consider how long you have been using the card before asking for an increase in the limit.
  • If you have been struggling to repay the credit advances on time, don’t change the credit limit. It will impact the credit score you have.
  • Be prepared for additional verification from the bank. The representatives might ask questions about your source of income to ensure that you will pay on time.

With a good credit score and card utilization history, you can easily change the given credit limit from the bank.

2. Apply For A New Card

You can apply for a new credit card online with an increased credit limit. While getting a new card, you are required to: 

  • Check your current credit score
  • Apply through the online portal
  • Submit all required documents
  • Meet the approval requirements
  • Submit the proof of income

Different card issuer banks offer different benefits, such as signup bonus, interest-free cash advancement, etc. So when you get a new card, make sure to follow the bank’s website guidelines. If you are eligible for the credit limit increase, you will receive a new card with an enhanced credit limit.

Determine The Right Credit Limit For You:

You can easily determine the appropriate credit limit for you by considering the following factors:

  • Your fined income amount
  • Your current age
  • The liabilities you have
  • Your credit history
  • Current credit score

Consult with the bank’s representative to understand what credit limit will be suitable as per your current financial situation. Indeed, it will help you to decide on increasing/decreasing your credit limit.

When Should You Reduce Your Credit Limit?

So far, we have discussed effective ways to increase your credit limit and the factors involved in making a decision. There might be certain situations when decreasing the credit limit can benefit you. So when is the right time to reduce your credit limit? Consider the following points:

  • When the cumulative credit limit of all credit cards is 20 times higher than your monthly income.
  • When you are struggling to make on-time bill repayments.
  • When you are applying for an enormous bank loan.
  • When your credit score is affected due to high credit utilization.

For all the above reasons, you should reduce the credit limit and try to make up to maintain a good credit score.

Also Read: Steps To Transfer Money From Credit Card To Debit Card

The Takeaway: Should You Change The Credit Limit?

The credit card limit increase might offer you additional financial benefits but can negatively affect your credit score. So whether you increase or decrease your credit limit, make sure it doesn’t impact your current credit utilization ratio. You can consult with your financial advisor to make a decision!

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