Depending on your credit history and the bank you approach, you will get a credit card with a different credit limit. These limits are stringent amounts that cannot be exceeded while making transactions using your credit card. We provide you with everything you need to know about credit limits or credit card cash limits.
We start by explaining what exactly is a cash limit in a credit card, or what is a credit limit. We follow this up by mentioning the extent to which a credit limit can be used. Many credit cardholders assume that a credit limit cannot be surpassed.
Changing your account settings, however, will permit you to surpass this limit with the corresponding payment of a penalty fee. We also expand on the correlation or link between a credit limit and your subsequent credit score.
We also explain how to alter your credit limit if you are unsatisfied with it. Treating the credit you procure in the right way is key to changing your credit limit over a period of time. To conclude, we explain how to report your credit limit dealings to your pertinent credit bureau, if it has not already been reported.
What is the cash limit in a credit card?
Based on how you have dealt with credit in the past—if you have had any missed credit card bill payments, credit defaults, unpaid loans and so on, you are provided with a limit based on which you can purchase products with a credit card. This credit limit affects your credit score and your ability to garner a loan or another credit card in the future. Hence, it is important to treat this credit limit well.
To what extent can the credit limit be used?
When applying for a credit card, you have the option to choose whether you wish to use your credit beyond the credit limit. If you do not choose to do this, transactions that go beyond your credit limit will automatically get rejected. It is recommended not to pick the option of going beyond your credit limit, as this option is generally associated with a penalty rate. Penalty rates are usually higher than interest rates on credit cards, and are not to be messed with. Understanding the terms and conditions of your credit card before selecting the ‘beyond credit limit’ option is recommended.
What is the connection between a credit limit and a credit score?
Your credit limit and how much of it you use every month is reported to your pertinent credit bureau. This, in turn, impacts your credit score. Having a high credit limit can paint a worrisome image of yourself to the credit bureau.
This is because it shows these bureaus that you have a large line of credit that can be used to pay off your debts. This can, in turn, result in you not having sufficient funds to pay back this amount in time. However, having a large credit limit with no past of credit default paints a good image of yourself to credit lenders.
How can you change your credit limit?
This depends completely on how well you treat your credit. If you are an individual that has paid every credit card bill on time and has no history of credit default, then your credit card issuer may extend you a large credit limit.
Access to more credit based on your credit responsibility provides you with cheaper credit options, and even improves your credit score. However, any lowering in an individual’s credit limit can result in lenders keeping their guard up when you approach them for credit, or when you wish to qualify for a loan.
It must be noted that you can also request for a higher credit limit. Upon making this request, credit card issuers will generally re-evaluate your credit history standing, and decide whether to extend or reduce your credit limit.
What to do if your credit limit does not get reported?
Generally speaking, every individual should ensure that their credit limit gets reported to credit bureaus, because an unreported credit limit can hurt your credit score more in the future.
If you are an individual that has specifically increased or maintained a good credit score and abided by the credit limit you have, then reporting your credit limit is all the more important. The first step in such a situation is to call your credit card issuer and ask them how to go about reporting your credit limit. Every credit card issuer goes about this process differently. They are not the main people in charge of this process, so requesting them with the contact details of those in charge of this process is recommended. The next step would be to lower your dependence on your credit card. If your credit limit is not being reported to the credit bureau then there might be a problem with your card. Reducing your dependence on such a card until the report gets submitted, while also actively using it every once in a while is suggested. According to several consumer reviews, those cards that are now labelled as the best credit cards in India’ do not face such problems, and provide consumers with higher credit limits.
A rule of thumb that many credit cardholders religiously follow is to use only 30% of their credit limit. A high credit limit with only a fraction of it being used can improve your CIBIL score.