When using a credit card, you must know some special things related to it

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The company that launched the credit card has initially approved a lower credit limit for new card applicants. After which the decision is being made to increase the credit limit in view of the repayment and income growth of the cardholder. However, after spending more than accepting the proposals of high credit limit, there is a fear of getting stuck in the loan trap. Let us know the advantages and disadvantages of increasing the credit limit.

Credit score may improve:
Credit bureaus look at your credit utilization ratio when calculating your credit score. This ratio is the ratio of the total credit limit used by a cardholder. Credit card companies generally consider CURs to be a sign of debt when they are at more than 30 percent levels. Therefore, increasing the credit limit can see an improvement in your credit score.

Vantage to deal with financial crisis:
Increasing the credit limit helps in dealing with the financial crisis. It can work as an emergency fund due to financial crisis such as job loss, sickness, accident, disability etc.

Possibility of getting more loan:
An increased credit limit can get you more loans. This limit is generally accepted in lieu of the credit cardholder’s credit limit. Loans against credit cards are usually pre-approved.

Fear of getting into debt trap:
After an increased credit card limit, you can spend more, but if you do not use it wisely, you can get caught in the debt trap.

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Higher interest may be required to be paid:
If you do not pay your bill every month, you may have to pay more interest on your outstanding balance.

Possibility of getting more loan:
An increased credit limit can get you more loans. This limit is usually accepted in lieu of the credit card holder’s credit limit. Loans are usually pre-approved in lieu of a credit card.

Fear of getting into debt trap:
After an increased credit card limit, you can spend more, but if you do not use it wisely, then you can get caught in the debt trap.

Higher interest may be required to be paid:
If you do not pay your bill every month, you may have to pay more interest on your outstanding balance.

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