I have a credit card with a Rs. 56k limit and this is about 15 years old at least. Every year Icici bank calls me and says ‘we are happy to increase your limit..please send and sms….’ I do not respond, as i do think that this limit is NEVER breached ..and anyway I do not use the limits beyond Rs. 30k…

I was looking for reasons why I should increase my limit and found 2 articles saying what are the benefits of increasing the limits…i did not find it convincing..please tell me…what do you think?

http://www.investopedia.com/financial-edge/0212/6-benefits-to-increasing-your-credit-limit.aspx

and

http://www.moneycontrol.com/news/credit-cards/5-benefitsincreasing-credit-limityour-credit-card_4022961.html

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  1. I think all such reasons may look ‘reasonable’ on the face of it. However, they all are veiled to make you increase your limit, then increase your spending and finally increase their earning.

    The ‘higher rewards’ is so very typical of them.

  2. I am accepting your point that there is no need to increase the limit. I bought the credit card because initial days we have some websites which accept only credit cards. But now the situation is totally different. You can use internet banking, mobile banking , paypal etc for online purchase for whatever amount you want. I hope in India our CIBIL score is determined by our repayment history of loans and creditcards. Suppose if we don’t have credit card and if we didn’t take any loan, then our CIBIL score cannot be determined. Is it really a concern in getting loan? I don’t know.

  3. Both the articles enumerate more or less the same points. And none of the reasons seems convincing. I guess one may need a higher limit of say INR 50000 or above for instances like
    1. Buying return flight tickets for a family of 4 or 5, more so for a foreign destination.
    2. Enrollment + exam fees + study materials for CFA/FRM exams.

  4. I have seen a commercial from my bank in their ATM, INCREASE CREDIT LIMIT: Couples watching some item from outside a shop holding 5-6 bags (new purchases). Is there a limit to greed of buying everything we see?

  5. >>> Should we ask/request to raise credit limit?

    1. Depends on how much credit limit one has at present
    2. Rather the question should be “Do you have enough credit limit to carry out daily routines + extras just in case of emergencies

    Keys points to consider:
    1. Never use a DEBIT CARD, instead always use a CREDIT CARD and “pay-off” every cycle in FULL
    2. This avoids your liability for any fraudulent activity as Credit Cards are covered under insurance and your bank account is not covered
    3. Using Credit Card helps to build your credit score/history over time in case you need it later
    4. Make sure you read and validate credit card statements to avoid fees or charges you do not recognize as you can immediately “dispute” them
    5. Most important STOP living on CREDIT and start being financially practical…

  6. The investopedia reasons apply mainly for people resident in USA where credit scores are major factor on many things such as loans and even employment. One of the factors of the score includes ratio of credit used to the credit available. So a higher limit is beneficial. If CIBIL score is based on such things, it might be worth considering. Of course all this assumes that the user is responsible enough to repay the credit in full in each billing period.

  7. I think initally it is better to have lower limit but once a person develops spending habit of proper using a credit card. The limit cab be progressively raised depending on the dependency status a person has. A young man for 25 with fresh card may not raise his limit but a man in > 35 with h/o proper use of credit card my enhance limit to use i emergency , extra spending some time

  8. The available credit limit and % utilization is a key factor in computing the credit scores and credit worthiness besides the repayment track record. This metric is a part of the Credit report in countries like USA, UK and Canada.

  9. Credit score is more important in countries like US. But in India it is not that important. For example, I have never heard of any banks offering lower interest rate to people with good credit score. Here in India, you can get a loan, even if you don’t have a credit history. So, I think these points apply mainly in developed countries.

  10. Dear Sir,

    Ditto.

    74K limit, ICICI called, sends SMS, Emails etc to increase the limit.
    I’ve never crossed 35K in last 14+ years of use.
    never felt the need of using a credit card for big ticket purchase as I get hefty discount on cash payments.

    conveniently ignored the messaged/email.

    The articles has one point which says increase limit to credit history shows you use partial credit. that will improve score.
    But that is for the borrowers, I want to be in lenders list 🙂

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