What is Credit Card Limit?
10 November, 2023
A Credit Card gives you the flexibility to make purchases and payments without worrying about having the funds debited instantly from your Bank Account. With your Credit Card, you receive a credit limit which you can use to make these purchases and payments. This credit limit differs from user to user and is based on their specific personal and financial factors. If you are in the process of applying for your first Credit Card, you should know what Credit Card limit is and how card issuers determine it.
What Is Credit Limit In Credit Card?
The credit limit on Credit Card refers to the maximum amount of money available to the cardholder, to make purchases or payments in during a given monthly credit cycle. Every Credit Card comes with a fixed monthly limit set by the issuer, up to which the cardholder can initiate spends and payments on their Credit Card. Once the Credit Card limit is fully utilised or exhausted, any transactions conducted on the Credit Card are declined by the card issuer.
How Do Credit Card Limits work – An Example
Let us assume you have a monthly credit limit of ₹120,000 on your Credit Card. During a given month, you use the card to pay for your utility bills, insurance premiums, grocery expenditures, online shopping, and other monthly expenses. In total, you spend ₹80,000 on an average on your Credit Card in that month. This means that you are within your prescribed credit limit. As such, you can charge expenses of up to ₹40,000 more on your Credit Card in that month since your maximum monthly credit limit on the card is ₹120,000. However, if your Credit Card spends exceed this maximum limit of ₹120,000 in that month, your transactions will be declined.
How Card Issuers Determine Your Credit Card Limit
Credit Card issuers assess various factors when determining your Credit Card limit. These include:
Your Credit Score
Your credit score is a three-digit number that gives lenders insight into your creditworthiness. It ranges from 300 to 900 points, and gives lenders a glimpse into your credit borrowing, handling, and repayment behaviour. A higher credit score usually translates to a higher credit limit.Monthly Income
Your net monthly income also plays a significant role in determining the Credit Card limit offered by Credit Card providers. If you repay your Credit Card bills on time, without defaulting, your card issuer is more likely to enhance your credit limit when your income increases.Existing Debts
Credit Card issuers consider your existing debts, such as ongoing loans and outstanding Credit Card balances while deciding the credit limit of your card. If your outstanding debts are higher, you are deemed a risky borrower, which means you may be offered a card with a lower Credit Card limit.Payment History
Paying your Credit Card bills in full, on time, makes you an ideal customer in the eyes of Credit Card issuers. If you always pay your entire dues (and not just the partial or minimum amount due) by the due date, you are more likely to receive an enhanced credit limit.Employment Stability
Being stably employed for a longer duration and not having any gaps in employment also influences the Credit limit determination process. Continuous employment and income shows creditors your ability to repay your bills, thus improving your chances of getting higher credit limits.
How to Increase Your Credit Limit
As your financial situation improves, you might want to request a Credit Card limit increase to have access to more funds on credit. Here are some tips to increase your Credit Card limit:
Maintain a Good Credit Score
Ensure your credit score is always above 750 points to increase your chances of getting a Credit Card limit increase. This, you can do, by paying your dues on time, and not borrowing more than you need. Remember, the higher the credit score, the higher your credit borrowing abilities.Track your Credit Utilisation Ratio
Maintaining an average credit utilisation ratio of 30% of your total credit limit is another neat trick to get a credit limit enhancement. Not using your entire credit limit shows creditors that you are not overly dependent on your Credit Card for your expenses.Show Proof of All Income Sources
You can show your card issuer your various income sources besides your monthly income. So, if you have other income sources such as stock market investments, Mutual Funds and dividends, Fixed Deposits, hobbies generating passive income, etc., you can show them to get an enhanced credit limit.Show Proof of Income Enhancement
Your employer typically increases your salary every year. If you want a higher credit limit, you can show proof of your revised monthly income to your creditor and request for a Credit Card limit enhancement. You may need to provide your latest salary slips as proof of increased income.Apply for an Additional Credit Card
You can apply for Credit Cards from more than one Credit Card issuing bank or entity if you are eligible. Doing so, allows you to get a considerably higher credit limit. However, you must not apply with different issuers simultaneously as it can make you appear credit hungry and impact your credit score.
How To Check Your Credit Limit Online
You can choose from different banking platforms to check your Credit Card’s limit. They include:
Internet Banking: You can login to your internet banking account and check the Credit Card limit under the Credit Card section
Mobile Banking: You can download your Credit Card issuer’s mobile banking app, log in to it, and check the Credit Card limit under the Credit Card section.
IVR: You can call the customer care helpline of the Credit Card issuer and follow the IVR instructions to check the Credit Card limit of your Credit Card.
Get Credit Cards with High Credit Limits From HDFC Bank
At HDFC Bank, we offer an array of Credit Cards with exclusive benefits. If you can show us that you are steadily employed and drawing a stable monthly income, and if you fit our eligibility parameters, we will happily issue Credit Cards to you. We determine your Credit Card limit after assessing your monthly income and credit score, among other things. We also enhance your credit limit from time to time, based on your usage and credit handling behaviour.
Apply for Credit Card online to access higher Credit limits.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Credit Card approvals at the sole discretion of HDFC Bank Limited. Credit Card approvals is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
