Credit Card Tips: Should you increase your credit card limit or not? Know the good and bad things..

Credit Card Limit: A great feature of credit cards is that you can increase the limit of your old card only. Now, the biggest reason and biggest advantage of using a credit card is that it helps you in meeting expenses other than your basic needs. In such a situation, if any emergency arises or important expenses increase, then you feel the need to increase the credit card limit. Banks provide you with this facility. You can apply to the bank to increase your credit card limit. For this, banks check you on some parameters and see whether your limit can be increased or not.

Benefits of increasing credit card limit

There are many benefits of increasing credit card limits. First of all, if your credit card has a higher limit, more of your needs are covered. If you need more money for lifestyle expenses medical expenses or child's fees, you get a backup. This increases your buying power.

Credit score is better than credit utilization ratio

Banks look at your credit utilization ratio. CUR means what is your credit limit and how much you spend. The lower the CUR, the better the credit score. Generally 20-30 percent CUR is considered good. If your CUR is low, banks consider you a less risky customer.

Logic of Credit Utilization Ratio

Understand this as if you are dependent on credit cards for most of your expenses. Your CUR has reached 70-80%. That means you are spending up to 80 percent of the limit. In such a situation, the bank will feel that you do not have money to cover your expenses and you may default on the loan. In such a situation, not only does your credit score get affected, but you may also face difficulty in getting a loan. One thumb rule is that banks want to give loans only to those people so that they know that they will continue to get regular income in the form of installments.

But before increasing your credit score, remember these things

The biggest risk of increasing the credit card limit is that due to increased purchasing power, you start spending unnecessarily. You don't even realize when you cross the limit of your budget, in such a situation your credit score gets affected and your EMI expenses also increase.

Have to pay more interest

Due to this you also have to pay more interest. If you spend more, your interest burden also keeps increasing. You don't need to be successful in paying your entire credit card due every month, in such a situation it can increase more worries for you.

Taking multiple cards is also an option but...

You can also keep multiple credit cards without increasing the credit card limit. With this, you will get different features and offers, but if you want to adopt this option then you should know that you will have to pay different annual charges on different cards. Also, having multiple cards can make it difficult to manage payments or remember the credit period.