Should i increase my credit card limit
- 1 Credit Card Enhancement Letter: How to apply for increasing credit limit
- 2 Request Letter for Increase in Credit Card Limit
- 3 Credit Card Limit: Are You Getting What You Deserve?
- 4 wiseGEEK: What Should I Know About Going over a Credit Card Limit?
- 5 Should You Accept That Pre-Approved Credit Limit Increase?
Credit Card Enhancement Letter: How to apply for increasing credit limit
We will begin with a short checklist. If you can tick them off before you write an application letter to increase your credit card limit, chances of approval will be higher. So, what are they?
The most important factor behind a successful credit limit enhancement application is regularity and discipline in paying off credit card debts for at least last six months, if not the whole year. If you have been paying your credit card bills on time for last one year, without any fines or late payment charges, chances are that your credit score (as well as dynamic credit limit) is high or satisfactory. You simply must have a good credit history before you should even think of applying for credit card limit increase: both for a faster approval as well as your own financial health.
As an Indian, you are obviously familiar with a popular etiquette: when you pay someone a visit, do not consume every food they offer. Having some food left on your plate is a good gesture. The same applies for your credit as well. If you eat up all the credit you are offered, your credit score will go down proportionately. For example, if you have a credit limit of fifty thousand rupees on your credit card, and your debt is around forty or forty-five, you have an extremely high credit utilization level. Your debt to limit ratio should be a maximum of twenty to thirty percent; in other words, if you are offered a credit limit of fifty thousand rupees try to keep your debt within ten to fifteen. Sharing your debt between multiple credit cards to lower this ratio may be a good technique, if you can craftily handle them all. Having around ten percent credit utilization level is often a surefire way to get your credit card limit enhancement application approved!
Do a quick search on your bank#39;s website whether they offer to download credit card limit enhancement form in PDF or DOC format. If not, visit the branch and ask for a hardcopy. Most banks in India have their own pre-formatted credit card limit enhancement form for download (SBI, HDFC, Axis, ICICI etc.) where you just have to put the relevant information and submit it to the bank. If there is no such form in place, only then you have to write a letter yourself. Here we have provided a sample credit card limit increase letter to bank manager for your reference. However, please note that this is a model credit limit enhancement letter and different banks may require different write-ups; you should always seek advice from the officials regarding this.
Request Letter for Increase in Credit Card Limit
Sample letter to hdfc, fnb to increase credit card limit. How to write a letter to the bank to increase my credit card from 100$ to 300$ since have been banking with them for the last 11 years. For my business issue it is argent please.
Credit Card Limit Increase Letter Template
The bank manager
It is to request an increase in credit limit on my credit card. I have an account in your bank as reference no.12345. With given credit card and given credit limit I am unable to meet my monthly expenditure. Furthermore, I cannot carry additional cash all the time to pay for top up expenditures.
Hence, it is requested that maximum credit limit of my card be increased so I can manage my monthly expenses with ease.
I shall be very thankful to you for this favor.
Application to Increase Credit Card Limit
London, England, United Kingdom.
Standard Chartered Bank,
REQUEST FOR THE INCREASE IN CREDIT CARD LIMIT
It is stated that I have been using your bank as account holder for last five years. During this period, I keep on making transactions on frequent basis, using credit card. The card which I am using has limit that cannot exceed twenty five thousand dollars.
It is pertinent to mention here that I have expanded my business and need to make transaction of amount more than its defined limit.
Therefore, you are requested to please increase the limit of my credit card from twenty five thousand to fifty thousand (dollars).
An early action in this regard shall be highly praised.
Account No. 000000000.
Application for Increase of Credit Card Limit
Bank of America,
Subjects: Request to Increase My Credit Card limit
I am your client since last 11 years. I have shown my trust on your bank despite all the ups and downs but now I am in a desperate need of your favor. I am the owner of a credit card of your bank whose no. is 6896867. It has the upper limit of $100. Due to expansion in my business I have to make bigger transections and make bigger payments for which upper limit of $100 is very less. So it is my humble request to please increase the limit of my credit card from $100 to $300 on urgent basis so that I can make my business transactions with greater ease.
I hope you would immediately solve my problem.
Account no. 7859797978
Request Letter for Increase in Credit Card Limit
The branch Manager
State Bank of China,
Nanjing Dist. PRC.
SUBJECT: Request for Increase in Credit Card Limit
I, Peng account holder at your bank in this branch via A/C no. 12345-123456778-00. I am availing your gold credit card service with credit limit of 100 USD. I have felt increase my usage since last two months. So, I request you kindly to increase my credit limit up to 300 USD with platinum service. Kindly approve my request and process it urgently due to business needs. I shall be very thankful to you.
Credit Card Limit: Are You Getting What You Deserve?
In this credit cards 101 type post, I thought I’d share what I know about your credit card limit.
When you are issued a credit card, you are assigned a credit card limit. This is the highest balance you can spend on the card. Anything spent above this amount will incur an above-the-limit fee. Your initial credit card limit is based on your income and credit history.
Charge Cards Like the ZYNC from American Express(sm) Have No Pre-Set Limit
Some credit cards do not come with a limit. American Express charge card, for instance, don’t allow you to carry your balance forward. For that reason, you don’t really have a limit on your spending within the month. After all, you’ll be paying it all off. What do they care how much you spend. However, I’ve heard that although there is no stated, pre-set limit, you will receive a notification when you’ve reached a “soft” limit, based on your history of spending with the card.
Why Your Credit Card Limit Was Lowered
As a response to the recent “credit crunch” the financial world felt, the credit card companies began lowering credit card limits. You may have experience this last year. Some consumers felt as if this was done without merit to their accounts. My limit was lowered on a card I wasn’t using. I wouldn’t care except I know it affects my credit score. Here’s how…
How a Credit Card Limit Affects Your Credit Score
One of the factors involved with calculation your FICO credit score is your “amounts owed”. This is judged based on the amount owed compared to the amount available. Therefore, if you have a high credit card limit, any balance you carry will pale in comparison to your high limit. It’s recommended that you keep your balance to 25% of your overall limit. Having a higher limit will help your credit score. For this reason, charge cards, which might report a limit of $0, are often considered bad for your credit score.
How to Raise Your Credit Card Limit
Considering the effect the credit card limit has on your credit score, you might want to try and raise it to it’s highest level. Credit card companies will naturally raise your limits over time as your payment history builds up. But you can also call them and request a credit limit increase. Make sure you ask them to only do a “soft pull” of your credit history. Some online portals allow you to do this as well. Takes just a few minutes and could really help your score.
Do you have a recent experience dealing with your credit card limit? Share it in the comments below…
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Philip Taylor, aka PT, is a CPA, financial writer, podcaster, FinCon Founder, husband, and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or Google+. Listen to the new podcast, Masters of Money!
@James #8211; that#8217;s an interesting approach. it shows that personal finance is truly personal. you should do what works best for you.
every so often i get a notice saying my credit limit has been increased and i call them up right away and tell them i don#8217;t want my limit increased.
i personally feel my limit is high enough and just because they want me to spend more i don#8217;t see a need to do so.
find a limit that works for you this way you can buy what you need but you don#8217;t get out of control.
Oops on my comment above.
I meant that it#8217;s a script to increase your credit card limit and lower your interest rate. We learned it at a Rich Dad Poor Dad seminar.
A good idea is to use other methods besides just a credit card. Debit cards should be used for smaller, more maneagable purchases so that you can keep your credit cards open for emergencies and you can keep that balance near 25% of the overall limit.
wiseGEEK: What Should I Know About Going over a Credit Card Limit?
Going over a credit card limit can have some unfortunate consequences. It can involve large penalties or extra fines and fees, a transaction could instead be denied, and it may temporarily affect your credit score. Most people worry a lot about this last consequence, but it should be stated that accidentally going over the limit once is not likely to have a long term effect on your credit rating.
Credit card companies have numerous options they can exercise when a person tries to make an over the limit purchase. Usually, if the amount is very small, they won’t deny the purchase. This is especially true if the limit had not been reached prior to the purchase. A large purchase that goes over the credit card limit by a greater amount is likely be handled different.
If a customer has excellent credit, the card company might increase the limit. It is better to call the company and ask for an increase instead of waiting for their response. Alternately, the card company can simply refuse the transaction.
Another tactic is to allow the purchase but to charge extremely high fines. These penalties should be defined in each credit offer. The amount owed on over limit expenses is usually due immediately and customers may be charged a late fee for going over a credit card limit and not paying the overage amount right away. All in all, the combination of penalties and fees may be quite high if you exceed your limit.
Sometimes, credit card companies treat going over the limit as an excuse to raise interest rates. Alternately, they may charge additional interest on any over limit amounts. It’s wise to avoid this practice because of the potential fees involved.
As for your credit rating, the credit reporting agencies tend to evaluate how much credit is available to a person. When someone has $1,000 US Dollars (USD) of available credit and uses $900 USD, there is only 10% available credit. The credit rating reflects negatively when a person uses up most of his or her available credit, and obviously going over a credit card limit will show that the person does not have any available credit.
When a person can immediately rectify this situation, this report changes quickly. The credit report would only reflect this in the month it occurred. Constantly going over your credit card limit will mean this always shows up on your credit report, however. Consumer counselors recommend that consumers use no more than 30% of their available credit to maintain a good credit rating, and this will help keep purchases from exceeding credit limits.
4) @SurfNturf9quot; - I agree that the department store cards carry very high interest rates. I wanted to say that many banks are also changing the minimum payment percentages because so many people have maxed out their credit cards.
I know that Chase changed its minimum payment from 1% to 2% and some people are even paying 5% of the total balance in some cases. While this may not seem like much if you have a balance of $25,000 those credit card payments can feel like a small mortgage.
Also most of the banks have upped their interest rates for late payers to up to 30% interest. So if you can pay down your debt you are better off because borrowing this money is getting more expensive.
I always look at how long it will take me to pay off the balance and that always keeps me from paying the minimum payment.
3) @GreenWeaver9quot; - I agree with you. This is why a lot of department stores always try to get you to open an account and offer you additional savings on your current purchases if you do.
They know that once you open the account you will more than likely buy more than you would have if you were paying cash and they earn about 24% in interest payments for those customers that carry balances.
The department store credit card APR is among the highest of all the credit cards out there. I do have a Macy’s account, but I only use it a few times a year and then I pay it off right away. I only use during Black Friday when the incentives are huge.
2) @Cafe419quot; -I agree with you especially if something like this happens in mixed company. I wanted to say that when I had a student credit card in college, I found myself carrying a balance way beyond college and ended up maxing out my credit cards.
In fact my credit card balance was $9,000 which is when I had enough and paid down my credit card bill, and I now use my credit card sparingly and pay off my bills at the end of the month when I do.
I think that another good strategy to avoid overspending involves developing a budget and allocating a certain amount of money in cash for each category and placing the cash in the envelope.
This way if you designate your clothing allowance to be $200 for the month, once the envelope is empty you are done for that month.
This will force you to spend what you can afford to spend. There are many studies that show that when you use your bank credit card or any credit card for that matter you will tend to spend more because you are not held immediately accountable for your purchases as you are when you pay cash.
I always try to pay my credit card bill at the end of the month. I used run up balances but when you start to do that it can easy to get carried away and then you have a huge set of bills to pay that can overwhelm you.
It is also embarrassing if you are told that your credit card was declined because you were over your limit. This happened to a friend of mine and I was embarrassed for her.
The additional charges for exceeding your credit limit don't help either. It is really a bad situation all the way around.
Should You Accept That Pre-Approved Credit Limit Increase?
If you faithfully pay your loans, mortgage and credit cards each month, then you’ve probably received a call or letter from your bank with the news that you were pre-approved for a credit increase or a line of credit.
You might be thinking, I don’t even use all the credit I currently have. I don’t need an increase.
But guess what? Turning down a pre-approved credit increase may actually hurt your credit score.
Why you were offered an increase
If you already have an account with a bank, and it pre-approves you for a credit increase or new line of credit, it’s typically because you are being recognized for being a good customer. By diligently paying off your card every month and staying on top of your current loans, your bank now trusts that you will pay them back if they increased your limit.
How an increased credit limit can improve your credit score
Usually, when you apply for a loan or request a credit increase, your bank sends in a request to the credit bureau for your current credit score. This is known as a hard credit check. And whenever a credit inquiry is recorded, your score is slightly affected. In the credit bureau’s eyes, applying for new credit is an indication of someone who is having financial difficulties.
However, the bank often doesn’t perform a hard credit check on your file before pre-approving you. Rather than performing a check, the bank’s decision to give you additional credit is typically based on what they already know about you as a customer: repayment history, account balance, how much you’ve invested, etc.
As a precaution, you should still ask the bank if they intend on performing a hard credit check before accepting the increase. Some banks may claim that you’re pre-approved but still do a credit check after the fact. And even if they do plan on performing a check, this doesn’t mean you shouldn’t accept the increase. While one hard credit check won’t cause your score to fall too much, multiple inquiries at the same time could really tank your score.
Decreased credit utilization ratio
Your credit utilization ratio is a key factor that plays into your credit score. It is recommended that you keep your utilization ratio within 10 to 20 per cent of your total available credit across all of your credit sources. This means that if you have $10,000 in total available credit, you shouldn’t carry a balance of more than $2,000. Spending more than 10 to 20 per cent can affect your score – even if you pay off your balance every month.
If you have more than one source of credit, it is also better to spread the balance over each card or line of credit. For example, if you have two credit cards and each has a limit of $5,000, it’s better to have $1,000 in charges on each card than $2,000 in charges on one card.
By increasing your available credit and maintaining the same level of credit utilization, you are essentially decreasing your credit utilization ratio, which can improve your credit score.
For example, if your limit is $5,000 and you spend about $2,000 each month, you are using 40 per cent of your available credit, which is way above the recommended ratio to keeping a good credit score.
But if you accept a pre-approved increase to $10,000, and you continue to spend $2,000 each month, you are only using 20 per cent of your available credit, which is within the recommended ratio range.
Diversified credit portfolio
Did you know that having diverse types of credit on your record can bump up your score? Ten per cent of your score is calculated based on the types of credit you use.
So if you only have credit cards and your bank offers you a line of credit, think about accepting that offer. Having a line of credit can benefit you, and you don’t even have to use it.
You never know when you’ll need It
We often think that we can just call up the bank and request a credit increase when we need it, but that’s not always the case.
For example, I once got a new job and had to buy a car within the span of one week. In an attempt to simplify the process (and earn a bunch of reward points), I planned on paying for part of the car and purchasing insurance on my credit card. However, that would’ve meant spending over 30 per cent of my total credit. I called my bank to request a credit increase, but the time needed for an approval was too long, so I ended up paying for my car via debit.
Similarly, if you lose your job, having a line of credit as a back-up source of income would be a relatively inexpensive way to make ends meet. But if you’re already unemployed, you’re going to have a hard time getting approved for any type of new credit.
Of course, there are reasons why you should say no to a credit increase. If you are in credit card debt or have a problem controlling your spending, giving yourself more credit is probably not a good idea. While an increased limit can potentially improve your credit score, it’s probably better to keep your available credit low if it prevents you from going into further debt.
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