When receiving a call from your bank saying you are eligible for an increase on your credit card limit. Would your answer automatically be “yes”?  Read further to find out why this wouldn’t be good idea:

How does credit limit actually work?

Let’s just say that you are a cardholder of a certain bank and you hold your salary or savings account with them, well most likely you will be sold a credit card from this bank.  This is exactly how banks cross-sell credit cards to their existing customers.

Most banks reach their decisions by reviewing details of your salary or savings account and based on themthey set up your credit limit. As soon as the bank tracks down your spending patterns and income flow they will consider an increase or reduceyour credit card limit.

Paying only the minimal dues you will unlikely receive an offerfor a credit limit increase. Your credit limit may also go down caused by any existing or chances of defaulted payments. However, if you pay your bills regularly and have a steady income then your chances of be receiving a phone call for that credit limit increase will be high.

Your income depends much on your credit card limit. No matter the earnings, you may earn less but have sufficient to pay your bills on time then your bank sees that they may increase your credit limit.

What You Can Do?

Generally the banks revise a person holding the card after 6-18 months of the offer with a minimum of 50% increase. Credit limit changes could impact, but if it will give you relief then decide onit. Be sure that you only use 30%-35% or less of your credit limit spending. You do not want to which in reverence it is called overutilization. If you are concern about overspending you can always request or opt for temporary enhancement by contacting your bank’s branch.