When we talk about credit cards in India, most people look at rewards, cashback, or joining bonuses. But one important thing that many people ignore is the credit limit. It may seem like just a number, but your credit limit affects many parts of your financial life, including your credit score, loan eligibility, and even your day-to-day spending flexibility. Let’s understand how.
What Is a Credit Limit?
A credit limit is the maximum amount that your credit card company allows you to spend. For example, if your credit limit is ₹80,000, that means you can spend up to ₹80,000 on that card. You don’t need to use the full limit. You can spend less and repay it as per your billing cycle. Once you repay the amount, your available limit is restored. This is called revolving credit.
How Banks in India Set Your Credit Limit
In India, banks and card issuers like SBI Card, HDFC Bank, ICICI Bank, Axis Bank and others decide your credit limit based on a few key things:
- Your income. Higher income often means a higher limit
- Your credit score. A good CIBIL score usually above 750 helps you get a better limit
- Your repayment history. If you’ve handled credit well in the past, you’re trusted with more
- Existing loans or EMIs. If you’re already repaying many loans, your limit may be lower
- Type of card. Premium cards usually come with higher limits
If you're new to credit like a student or first-time card user, your first card might have a low limit, maybe around ₹10,000 to ₹25,000. But over time, with responsible use, your bank may increase it.
How Credit Limit Affects Your CIBIL Score
Your credit limit has a direct link to something called credit utilisation ratio. This means how much of your limit you are using. For example, if your credit limit is ₹1,00,000 and you use ₹40,000, your credit utilisation is 40 percent. Experts suggest keeping it below 30 percent for a good CIBIL score.
Why? Because if you keep using most of your credit limit, it shows lenders that you might be relying too much on credit. But if you use only a small part of your available limit, it shows you are in control and that helps improve your credit score.
More Limit Means Better Emergency Support
Having a higher credit limit on your credit card can really help you during emergencies. For example, if there’s a medical emergency or you suddenly need to book travel tickets, you might not have enough money in your savings account right away. In such situations, a higher credit limit allows you to make the payment instantly. You won’t have to worry about arranging funds or asking someone for help at the last minute.
This extra limit works like a short-term loan, but without the hassle of applying for an actual loan. You don’t need to go through long paperwork or wait for approval. The credit is already available on your card, so you can use it whenever needed. It gives you peace of mind knowing that if something unexpected comes up, you have financial support ready to go.
Higher Credit Limits Help in Big Purchases
Let’s say you want to buy a mobile phone worth ₹80,000. If your card limit is only ₹50,000, you can’t use your card unless you break the payment or pay part in advance. But with a higher limit, you can easily make such purchases and convert them into EMI if your card allows it. This makes managing large payments easier and smoother.
Better Cards Need Good Limits
In India, banks provide different types of credit cards based on your income level and credit history. When you first apply, you may get a basic card if you’re just starting out or if your income is on the lower side. But if you show that you can handle credit well, banks will notice. They may then offer you better cards with more features and rewards.
Maintaining a good credit score is the key to unlocking these better cards. If you pay your bills on time, use your card responsibly, and don’t cross your limits too often, banks consider you a trustworthy customer. As a reward, they might upgrade you to premium cards. These cards come with exciting perks like free airport lounge access, complimentary movie tickets, cashback offers, and more reward points.
One big advantage of these premium cards is the higher credit limit. A higher limit not only gives you more spending power but also helps improve your credit score further if used wisely. So, the better your credit habits, the better the card you can get—and with it, better benefits that make your spending more rewarding.
What If Your Credit Limit Is Too Low?
If your credit limit is too low, it can become frustrating. Even small purchases can push you close to the limit and you have to constantly track your spending. Also, using a large portion of your limit often can hurt your credit score. You can request your bank to increase your limit, but they may do it only if you’ve been paying on time and using the card regularly.
Having a High Limit Doesn’t Mean You Should Overspend
Just because your credit card has a high limit doesn't mean you should spend more than you need to. Many people think a higher limit gives them more freedom, but that’s not really the case. A credit card is not free money—it’s a tool that lets you borrow for a short time. If you spend more than you can afford to repay, you’ll have to pay interest, which can be very high in India—sometimes between 36% to 48% per year. So, it’s important to use your card carefully and always try to pay the full bill on time to avoid extra charges.
Final Thoughts: Don’t Ignore Your Credit Limit
Your credit limit matters more than you might realize. It impacts your credit score, helps in emergencies, and can get you better deals from banks. Instead of just spending, focus on managing it wisely. Using your credit card smartly can pay off big in the future. Learn more about credit cards.
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