Is it wise to switch to a higher credit card limit on your credit cards if the bank gives an option?

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Is it wise to switch to a higher credit card limit on your credit cards?
Banks or credit card issuing institution based on your good credit card repayment record allow or provide you with an option to get your credit card limit enhanced (the maximum limit you can borrow or spend using the credit card). Though, there is no problem in subscribing to a higher credit limit value if you feel the need and the bank is providing you the same without requiring to furnish the income proof again, the card now needs to be used with more prudence than before. And you need to maintain your spending behaviour without much discord than before as in the other case you can land in a troubled situation.

The other aspect to the allowed provision of credit card limit by the bank is that in case you feel that if switching to a higher credit value can mar your spending habit in the long run and despite the feel you are in need of the higher credit limit on account of some contingency you can ask the bank to provide an increased credit card limit for a limited or temporary limit. Nonetheless, the decision to grant an increased high credit limit for a temporary time shall rest with the bank.

Also, as feared, an increase in credit card limit does not result in the lowering of your credit score and instead wrong or improper usage that may be due to over-spending on the credit card or not making the due payment in the interest-free period downgrades your credit score.

So, to be on a safer side and make optimal usage of your credit card with increased credit limit, you need to pay the due amount in time as otherwise you'll be liable to pay a high interest rate and also your credit score could go down due to poor repayment record. Likewise, as prescribed a credit utilization ratio of over 30% shall also not be in your favour. A credit utilization ratio is the credit amount availed as against the available credit limit by the bank. So, try to use the credit card for the maximum spending of 30% of the allowed limit. And even if you exceed this benchmark in some case, keep a track record of it as the credit score can not be lowered or degraded based on  a single transaction and is decided based on your long term payment record.

Read more about: credit card, credit score, cibil score
Story first published: Tuesday, February 18, 2014, 12:47 [IST]
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