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The coverage under CPP credit card protection membership in India is generally limited to the protection against loss, theft or misuse of the member's credit cards, debit cards, and other cards. CCP credit card protection also protects unauthorized transactions and emergency card replacement services.
The average credit card limit is decided based on multiple factors.
Protection plans for credit card fraud protection are optional. However, if your cards are ever lost or stolen, this is a great method to feel more secure and at ease. A wide variety of benefits, including monitoring for fraudulent activity, compensation for losses, and new cards in the event of theft, are available through plans of this sort.
You can either request the bank for a credit limit increase or the bank may offer it to you upon assessing your credit history.
If you exceed your credit limit, you are entitled to pay an overlimit fee which is charged by the bank as the penalty for superseding the credit limit assigned to you.
You must contact the bank's customer service to terminate the credit card fraud protection Plan. You must call from the cell phone number associated with your account. If you don't, your request can get stuck in limbo. This precaution should be taken before making the call.
If all your documents and records are clear, then your request may be accepted in a few days’ time.
An increase in the credit limit only reflects positively on your CIBIL score,
Some of the common reasons why your credit limit increase request does not go through are poor credit score and credit history,
Although it is possible to have your credit card limit reduced,
Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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In this world of limitless possibilities, is your credit card limit stealing your every chance to experience life? Whether it is buying that expensive souvenir while on vacation, or availing that limited time offer at your favourite shop. Are you constantly worried about crossing your credit card limit? Perhaps, a credit card limit increase can put your anxiety to rest and allow you to get more from life.
What is a Credit Card Limit?
A credit card limit is that amount which you can spend without having to pay the penalty during each credit cycle. The issuing bank fixes a credit limit on your card, and it usually varies from user to user.
There are many factors that contribute towards determining your credit card limit. Some of these include the type of credit card, your income, your ability to repay the dues, your credit score, your previous payment history as well as the present financial obligations. In short, your complete credit history is thoroughly scrutinized to set this spending limit.
Needless to say, you are not allowed to exceed the spending limit set on your credit card. Once you have hit this maximum limit mark, your credit card issuer has the authority to decline all your future transactions. Worse, you could be charged a penalty for using your credit card after exhausting the maximum spending limit. And that would be a complete dampener to your financial peace. Apart from these, the credit limit on your card also impacts your credit score.
But there is little reason to worry, as with just one smart decision, you can overcome all these problems. And that is, getting yourself a credit card limit increase. Find out how to increase the credit card limit, especially, if you have any considerable forthcoming expenses.
Key Elements Influencing Your Credit Card Limit
You can find different criteria for the underwriting process to calculate the credit limit on an individual's credit cards. Here are the common elements banks consider to decide on the credit limit.
Individual's Credit History and CIBIL Score
CIBIL score is the first thing banks look at while approving your credit card application. Banks or other credit card issuers approach credit bureaus like CIBIL to know an applicant's credit score and accordingly assign the credit limit on cards. Banks take a risk by giving customers credit cards. Therefore, they fix credit limits on cards based on applicants' creditworthiness reflected in their credit history.
Banks are more likely to provide a higher credit limit if an individual has been disciplined to repay the previous debts and maintained a good credit score. In contrast, if a cardholder has shown irresponsible credit behavior to repay earlier debts, banks decline a card request or keep your credit card limit low.
Individuals should know that having no credit history may restrict banks from offering you a credit card as there is no previous data to analyze your repayment behavior that the banks can rely on.
Income and Credit utilization
Another vital element to assigning the credit card limit is the applicant's income simply because it is your income that enables you to repay your debts. The higher the income, the better the chances of getting a higher spending limit on the best credit cards. However, credit utilization also comes into play when deciding on credit card limits.
Banks consider your debt-to-income ratio also. They consider your existing debts to repay against your current income and how well you manage them. Numerous debts can increase your debt-to-income ratio, leading to a lower credit card limit. If you have a lot of unused credit card limits, banks consider it a positive sign. A low credit utilization ratio shows that you are a responsible person towards your credit. Banks will be ready to grant you a higher credit limit.
Limits on Your Other Credit Cards
Banks also consider credit cues from other credit card providers to set a limit on your credit card. Therefore, they will consider the limit provided on your existing credit cards, especially if it is a new card application. However, if you are already a customer of a bank, it can offer a high credit limit on your new card.
Type of Credit Cards
Credit cards differ in various features. If it is a card with a predefined credit limit, it will allow a specific credit limit irrespective of the other factors given above. There will be a fixed credit limit if it is a co-branded card or a card secured against your fixed deposit on the card. Suppose it is a premium card with a particular credit limit. Existing customers can get this card with a higher limit. In contrast, if a new customer applies for a basic card, they might not get a high-limit credit card even if their income and credit score is good. This is simply because the bank has set a limit for the maximum spending on the basic card.
Time Factor
Time is also another deciding factor. If an individual has been a bank customer for a long time, it can offer a high credit limit and your overall credit report. Even if the customer does not have previous debts with the bank, it can consider offering a credit limit with a high spending limit. Another scenario is that the credit policy in the economy might have changed, and banks have to be more cautious with credit disbursals. You can find a difference between the credit card limit issued two years back, and that issued this year.
These are the elements that a bank can consider to offer a credit card limit to its new and existing customers.
How to increase the credit card limit on your credit card?
Credit cards allow you to do so much more with your life. With a simple swipe, you can do away with the monetary stress and get the much-wanted lifestyle upgrade.
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So, here’s how to get the most of your credit card by increasing your credit limit.
Max it out
Develop the habit of using your credit card regularly for your transactions. This helps build a pattern in the system of the credit card issuer, where timely payments and constant use of the card gets registered, creating a good impression. This activity also helps in getting a good score. Once this happens, the bank will consider your case for a credit limit escalation at their end.
Take it slow
One can always request the bank for an increase in the credit limit, backed by a strong reason. But the credit limit can also be increased without this request. Issuing banks always study the pattern of credit card usage and payments. So, one of the convenient ways to increase credit card limit is to lie low and allow the banks to do so automatically. They will do this once they feel you are eligible for a rise in your credit limit after having assessed your periodic accounts.
Avoid unrealistic expectations
Issuing banks are always vigilant about their customers’ request for an increase in credit limit. Avoid being desperate as that can quickly put you under the bank’s radar and the chances of your credit card limit increase can become bleak. Also, holding unrealistic expectations for a credit limit increase like twice or thrice the amount can leave you disappointed.
Juggle it through
In case you hold multiple credit cards, you can opt to shift your credit card limit to another one. Choose the card to which the limit needs to be transferred and then go for it. However, this is applicable only if your cards have been issued by the same bank. Also, it's advisable to not discard the remaining credit cards immediately as it could reflect poorly on your credit score.
New credit card
Another way to get through this requirement is to get yourself a new credit card which has a higher credit limit than your current credit limit.
Difference between Total Credit Limit and the Available Credit Limit?
Available credit limit is different from the credit limit, also commonly referred to as the total credit limit on your card. It implies the amount which is left for the credit card holder to utilise after the amount for purchases and interest charged thereof has been deducted from the total credit limit. However, the available limit on your credit card fluctuates once the credit card holder makes the payments towards the principal amount and the interest.
Benefits of Increasing the Credit Limit on Your Card
There are quite a few benefits of increasing the expense limit of credit cards. The limit of credit card, which is set by the issuer, can be raised upon your request or over a period of close examination of your accounts and payments. However, if you are in two minds about taking this step, these factors might help you make the correct choice.
Enhances your credit score
Increasing the limit of credit card can have a positive effect on your credit score, provided your expenses don’t escalate. Financial institutions consider such cardholders more stable as they are not overspending and don’t have heavy debt attached to their name.
Nullifies the need of multiple credit cards
A good credit card with a high credit limit saves you from having multiple credit cards where additional charges and annual fees are levied. Multiple credit cards can be damaging if not managed correctly. When your credit card limit increases but expenses stay stable, you are able to cut down on your expenses on other cards and create a good credit score for yourself.
Low credit utilization
Eat the pie of having a good ranking and strong financial foothold with low credit utilization ratio on your credit card limit increase. Simply put, it means - if your initial credit limit is Rs. 10,000/- and you spend Rs. 5000/- then you are using 50% of your credit limit. But if you increase your credit limit to Rs. 25,000 and still spend Rs. 5000, your credit utilization ratio goes down, giving you an upper hand for a better credit score.
Avail loans with an ease
The credit history and good credit score are essential factors for you to acquire loans.
Emergency fund
The high credit limit is a befitting emergency fund incase of a health or monetary exigency.
Earn more rewards
When the limit of credit card is increased by the bank they consider you to be a valuable customer, and moreover, if you have a strong track record of timely payments, the bank does give you rewards for being a diligent customer.
However, it's crucial to take note of your spending habits. If you are someone who tends to rely majorly on credit cards to meet your needs and other demands, it's best suggested to steer clear from high limit credit cards, as you could get trapped in debt. But if you are someone who is extremely particular about clearing the dues and don’t have extreme expenditures, increasing your credit card limit can have many upsides for you.
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