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Merits and Demerits of an increased credit card limit

Why increase credit card limit

Merits and Demerits of an increased credit card limit

Increased Credit Limit

Learn about the benefits of increasing credit limit and the caution you need to take with a high credit limit.

Why Increase Credit Card Limit?

A credit card limit refers to the maximum amount you can spend using your credit card. Thus, increasing your credit card limit might mean realising the opportunity to spend beyond your financial capacity. However, that needn’t be the case, if you accurately understand and follow fundamental concepts like credit card limit and credit score, and the importance of high credit card limit.

Why You Should Consider Increasing Your Credit Card Limit?

Increasing your credit card limit tends to bring present and future financial stability. Here are a few benefits of increasing your credit card limit that you can enjoy:

It will Lower Your Credit Utilisation Ratio

Credit utilisation ratio is a key element in your overall credit score. It is the ratio of the total credit utilised by the user to the total credit amount available to the cardholder. It is best to maintain the utilised amount to about 30% or less of the net amount approved by the issuer. Credit utilised above 30% can have a negative impact on the credit score. This is because, from the lender’s point of view, an applicant who has a history of maintaining high credit utilisation ratio is more likely to face difficulties while repaying the full amount, than someone with a low credit utilisation ratio. Hence, a credit card with high credit limit inadvertently means that the user will have access to a bigger sum of money, without having any negative impact on the user’s credit score.

E.g., if you have a credit card whose maximum limit is INR 1,00,000, then it effectively means that you can only access INR 30,000, without hampering your credit score. Hence, if you increase your credit card’s maximum limit to INR 3,00,000, then you could use as much as INR 1,00,000, without your credit score being affected.

No Need for Multiple Cards

Carrying multiple credit cards is a common practice among people of all generations in India. While multiple cards given you the flexibility to spend and redeem different benefits on different cards, it also has the flipside of service charges levied by different banks for maintenance of the credit cards. Additionally, owning a single card with a higher credit limit helps you keep track of your expenditure, enabling you to plan your finances more systematically. To apply for a Standard Chartered credit card, click here.

It will be Easier to Qualify for Loans

If you monitor your expenses closely and make regular and appropriate payments, keeping in mind concepts such as the credit utilisation ratio among others, then your credit profile will definitely receive a boost. When the financial institutions start seeing you as a responsible lender, the chances of you qualifying for a low-interest, and high-principal loan also increases. This will enable you to negotiate better when applying for loans like an automobile loan, home loan or a short-term loan. For quick and easy loan approvals, click here!

It will Help You During Emergencies

Sometimes financial emergencies like immediate medical attention and hospitalisation, or extensive repair work at home, etc., can come out of nowhere. At these instances, the savings that you have in your bank accounts or fixed deposits may not be sufficient or in case of the latter, may not be immediately accessible. During such situations, it is imperative to have a credit card with a high limit. Having a high credit card limit means you can spend the usual amount on your utility bills, insurance premiums, and groceries, but at the same time, also have enough credit left to cover for unforeseen emergencies.

Higher Reward Points and Better Rewards

Each credit card holder enjoys some rewards from their respective banks and vendors. If your credit card has a higher limit, you can use it to pay for your travel expenses, utility bills, and medical bills and much more. That does not mean you are spending more than you usually do, but you are conducting most of the daily transactions through your credit card rather than using your debit card or cash. However, it is best to pay the credit card bills in full before the due date to avoid payment of interest. These reward points can help you get significant discounts on other expenditures like buying airline and train tickets and buying gifts off specific e-commerce sites, etc. Additionally, consistent usage and regular full payments may also help build your image for the banks to grant you other privileges. Check out the best Standard Chartered credit cards and their benefits!

It Will Not Deplete Your CIBIL Score

Increasing your credit card limit on an existing card is always a better option than applying for a new card. A new credit card can dent your current credit score. This is because opening a new bank account shortens your current credit history. A long credit history is critical as almost all lenders review the credit history of the applicant when making lending decisions. Longer credit history shows that the applicant has significant experience in handling and managing credit successfully. Thus it corresponds to a better score and adding a new account can reduce your current CIBIL score.

Things to Keep in Mind when Applying for a Higher Credit Card Limit

Increasing your credit card limit on your existing card might sound highly advantageous, but like all good things, it comes with minor demerits. Here are a few facts you must remember when you apply for a higher credit card limit:

Potential Inquiries by Issuers

When you ask for an increased limit on your existing credit card, the credit card issuer can pull your credit report by requesting an inquiry. Each inquiry is added to your credit report. While a single hard inquiry should not affect your credit record, a history of frequent credit inquiries by different banks have the potential to indicate credit risk.

A Chance of Increasing Expenses

A higher credit card limit is not an excuse to spend more. You must increase the limit to lower your credit utilisation ratio. So, refrain from being a spendthrift, as self-control is essential to make the best of your credit card limit increase.

If you can restrict your monthly expenses to the regular amount, in spite of a high credit card limit, then increasing the limit is a good option for your finances. In case you are afraid that you will spend extra if your credit card limit is increased, then it makes little sense to opt for a higher credit limit. Always ensure that the disadvantages of increasing your limit do not outweigh the benefits. If necessary, keep a full tab of your daily expenses to control your credit card bill and improve your credit utilisation ratio. To apply for a Standard Chartered credit card, click here.


The views expressed in the article are those of Standard Chartered Bank (“SCB”) and do not constitute financial, professional or other advice. SCB, including its Directors, Officers or Employees shall not in any event be liable for any damages or injury arising merely from your reliance on any information provided here. Each bank / financial institution will have its own processes/ fees/ charges and any information contained in this Article is only indicative. Before placing any reliance on any information contained or views expressed in this Article, we would request you take all steps necessary to verify the correctness thereof. The information contained in this Article is only indicative. Each Standard Chartered Bank Product has its own terms & conditions and should be referred to in entirety. We request you to kindly visit “sc.com/in” or visit your nearest Standard Chartered Bank Branch or call on our Customer Care numbers for more details.