4 Reasons Millennials Say Yes to a Credit Limit Increase


As soon as we Millennials start gaining financial independence, we are often bombarded with tons of financial advice from our friends and family, right?

And one of the most common tips is don’t use credit cards, right?

Despite the plethora of benefits that credit cards come with, we repeatedly feel uncomfortable with this payment method. And the result? Not only are many people reluctant to take out a credit card, but even those who already have it, end up refraining from increasing their credit limit further for fear of overspending.


What all those people, who believe in biased opinions or hearsay that cast credit cards in the wrong light, don’t realize that the problem lies in your usage and repayment behavior. towards this financial tool. Click here know the common mistakes made by credit card users.

So if you are also one of those millennials who hold a credit card but refrain from increasing your credit card limit, it’s time to hit the refresh button in your mind and read these awesome benefits of accepting a higher credit card limit.

Read also : Why Your Credit Score May Drop Despite Timely Payments!

1. Increases your credit score

How Raising Your Credit Limit Increases Your Credit Score

You may be wondering how increasing your credit card credit limit can boost your credit score. Let’s simplify this for you.

One of the key factors that loom large in the calculation of your credit score, and therefore influence, is your credit utilization rate (CUR). This is the proportion of the total credit limit used by you. For example, if your total credit limit is ₹1.5 lakh and your current credit card balance is, say, ₹60,000, then your CUR is 40%.

Now, since financial institutions generally tend to consider those who maintain a CUR above 30% as credit-hungry borrowers, credit bureaus are also following suit and lowering your credit score every time you breach that mark. .

So, since your credit limit is a key component in determining your CUR, having a higher credit limit would ultimately lower your credit score, provided that you do not increase your credit card spending while obtaining an enhanced credit limit. Subsequently, a reduced CUR will increase your credit score, which will improve your overall eligibility for loans and credit cards.

Read also : How Secured Credit Cards Can Help You Enter The World Of Credit Scoring

2. Expands your horizon to meet financial demands

A higher credit limit can help when there is a shortage of funds

Another key benefit of increasing your credit limit is that the enhanced credit limit can act as a bigger cushion in the event of unexpected financial demands, shortfalls or large expenses that you can channel through your credit card, without immediately jeopardizing your present cash in the form of bank balance or investments.

After using your larger credit limit to deal with such circumstances, you can easily repay the outstanding amount on the due date, which is usually around 18-55 days from the transaction date, or even convert this large amount into EMI, if needed, instead of having to bear the heavy financial burden of around 40% per year on unpaid dues.

Moreover, in case of financial requirement, you can also withdraw money from your credit card, if necessary. But only use this facility as a last resort and try to repay the amount withdrawn at the earliest, as twin fees in the form of cash withdrawal fees and finance charges are levied on such transactions.

Read also : Does it make sense to maintain an emergency fund if you have a balance and investments in a major bank

3. Provides greater reach to make large purchases through EMIs

You can make an instant EMI purchase or later convert a transaction to an EMI credit card

Credit card EMI features are becoming increasingly popular among users and merchants.

Whenever you want to make a relatively large purchase like an expensive TV, iPhone, watch, etc. there are various merchants who already have ties with credit card issuers to offer EMI facilities at lower interest rates or even as EMIs at no cost.

And that’s not all. Instead of buying goods directly from EMI instantly, you can even convert a large purchase later to EMI, by opting in to the credit card issuer’s app or website or by contacting them. on this subject.

All in all, the idea of ​​owning something on EMI that you couldn’t otherwise buy by lump sum payment is what drives many credit card users towards the EMI facility.. Since your credit card purchase would be against the limit itself anyway, having a higher credit limit can help you make larger transactions, if needed. Additionally, a larger credit limit would also help keep your CUR lower.

To simplify, let’s take this example. If your current credit limit is ₹60,000 and you want to buy a ₹30,000 mobile phone. Your CUR would be 50%, which is well above the 30% mark beyond which the credit bureaus tend to lower your credit score.

In such a case, if you had a higher credit limit, your CUR may stay lower and hence prevent your credit score from taking a hit as well. Like if you have a credit limit of say ₹1 lakh, your CUR in this case would be 30% which is much lower.

Therefore, it is better to have a higher credit limit if your card issuer has offered you the same, or you can check your eligibility by logging into the card issuer’s app or to online banking, and request a credit limit increase if eligible.

Read also : Stop these 5 daily financial habits that are hurting your credit score

4. Provides access to a larger credit card loan if needed

Loan against credit card

The credit card lending function is not known to many users. For the uninitiated, these are pre-approved loans typically offered by credit card issuers to select customers based on their bill paying history, spending habits, and more.

And since this loan is sanctioned by the credit card user’s credit limit, which is blocked by this amount, having a higher credit limit allows you to qualify for a larger loan amount whenever the need arises. The pre-approved nature of these loans generally eliminates the need for documentation, hence disbursement is among the fastest. As well, remember that your locked credit limit continues to be released as you continue to repay credit card loan EMIs, with terms typically up to 5 years.

Moreover, some credit card issuers even offer a credit card loan variant, in which the loan amount exceeds the credit limit, so the limit is not blocked when using this loan. .

Read also : 5 great financial resolutions for the New Year 2022

Click here to download CRED and unlock a plethora of exclusive offers, rewards, cashback, and more. on credit card payments, plus receive payment reminders, credit score check, detect hidden fees or charges, and participate in fun games that give you chances to win exciting gifts!

And don’t forget to consult the CRED to your friends and family!

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