Credit cards provide users access to short-term cash, helping them meet regular expenses. Credit cardholders also have flexible payment options; they can pay their credit card bills in full or Equated Monthly Instalments (EMIs).
While these are excellent services for customers, banks must ensure they provide cards to the right users. Therefore, they usually lay downcredit card eligibility criteriaduring application and set an upper limit on credit card consumption. This is based on the consumer’s repayment capabilities. The upper limit on the card is known as thecredit card limit. Read on to learn about credit card limits and the basic eligibility criteria that you need to fulfil to obtain a credit card.
What is a credit card limit?
A credit card limit is a predetermined purchase amount set by the issuer. It is the maximum amount you can spend using the credit card. You may incur an over-limit charge on your excess spends if you exceed this limit.
For instance, if you own a credit card with a ₹1 lakh credit limit, you must use it for expenses lower than that amount. Whether it’s cash withdrawals, online shopping or any other spending on the card, it should remain below ₹1 lakh. Using it beyond this credit limit can cost you higher charges and negatively affect your credit score.
With consistent credit card repayments and a healthy credit score, you can increase your credit card limit.
Banks decide your credit limit based on several factors, including your income, expenses, and credit history. Hence, your credit card eligibility is critical in determining your card limits. To compensate for their lenient criteria, banks typically offer lower credit limits and higher finance charges.
However, if you are looking for a higher-limit credit card with lenient eligibility criteria, you may prefer an IDFC FIRST Bank Credit Card. The bank offers a convenient application process with minimal documentation and a credit limit that meets your financial requirements. Moreover, these cards are loaded with rewards and benefits that focus on bigger savings.
Factors that determine your credit card limit
Banks determine your credit limit based on certain criteria, such as those mentioned below:
- Your net monthly income
- Age
- Expenses and liabilities
- Running loans and EMIs
- Credit history and scores
Your credit limit is greatly influenced by the above criteria. The bank may offer you a lower credit limit if you are a first-time applicant. However, the limit can be increased later if you repay consistently.
What are the basic eligibility criteria for a credit card?
Since credit limits primarily depend on your credit card eligibility, you must know the basic eligibility criteria to get a higher limit on your card. Here are the essential eligibility criteria:
1. Applicants’ age
Individuals need to be at least 18 before applying for a credit card. Some banks also have a minimum age requirement of 21 years. The upper age limits vary depending on the bank, ranging between 60 and 70 years of age.
2. Applicants’ income
An applicant’s salary is crucial when trying to obtain a credit card. It also helps banks decide their credit limit and non-payment risk. Most banks issue credit cards to individuals with ₹2.5 lakh annual salaries.
3. Nationality
Banks also consider nationality before issuing credit cards. However, this criterion varies from bank to bank as, India hosts various domestic and international banks. While several banks offer credit cards only to Indian nationals, some also issue cards to non-residents.
Since credit cards are typically a credit product, you need to satisfy the eligibility criteria to use them, as banks bear non-payment risk. However, if you meet the requirements and have a decent credit history and score, you can enjoy higher credit limits that suit your spending habits.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circ*mstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
FAQs
A credit limit is the amount of credit a lender grants you on a credit card or other type of credit account. Lenders determine your credit limit by examining your credit history and financial information. You can typically only spend up to your credit limit until you repay some or all of your balance.
How is the credit card limit decided? ›
Some of the key factors include: Monthly income: Your income level plays a crucial role in determining your credit limit. Creditworthiness: Your credit score and credit history demonstrate your creditworthiness. Employment status: Full-time, part-time or self-employed status can influence the credit limit decision.
What is a credit limit and how is it determined? ›
A credit limit is the maximum amount of money a lender will allow you to spend using a particular credit card or revolving line of credit. Lenders set those limits based on several factors, including your credit score, personal income, and loan repayment history.
What is an acceptable credit card limit? ›
If you're just starting out, a good credit limit for your first card might be around $1,000. If you have built up a solid credit history, a steady income and a good credit score, your credit limit may increase to $5,000 or $10,000 or more — plenty of credit to ensure you can purchase big ticket items.
Does your credit card limit depend on your income? ›
Annual income impacts your DTI ratio, which helps credit card companies determine your creditworthiness. The lower your DTI ratio and the higher your income, the higher your credit limit may be.
What credit card has $5000 limit with bad credit? ›
The U.S. Bank Altitude Go Visa Secured Card is the best option if you have limited/poor credit and are looking for a high credit limit. You can deposit anywhere from $300 to $5,000, making your maximum credit limit available $5,000.
How to get a high credit limit? ›
Getting a higher credit limit is fairly straightforward, with four primary options available: You can contact your issuer online via the app or online portal, phone customer service, check for an issuer card offer, or apply for a new card that will bump your overall available credit.
How is credit limit assigned? ›
Most companies check your credit report and gross annual income level to determine your credit limit. Factors that issuers are likely to consider include your repayment history, the length of your credit history, and the number of credit accounts on your report. The underwriting process varies from company to company.
On what 3 things is your credit limit based? ›
Your creditor will typically determine your credit limit based on factors like your income, credit scores and payment history. And the more responsible you are with your money, the higher your credit limit may be. Once your creditor determines your credit limit, you can spend up to that amount.
What credit card has the highest limit? ›
On our list, the card with the highest reported limit is the Chase Sapphire Preferred® Card, which some say offers a $100,000 limit. We've also seen an advertised maximum credit limit of $100,000 on the First Tech Odyssey Rewards™ World Elite Mastercard®, a credit union rewards card.
To figure out your DTI, simply divide your total monthly debt by your gross monthly income—the lower your percentage, the better. Many lenders prefer a DTI below 36%. A lower DTI paired with solid income could unlock a higher credit limit.
What's the maximum credit limit on Capital One? ›
According to anecdotal reports, the card's credit limit can be as low as $750 and as high as $10,000. However, Capital One does not list a minimum or maximum credit limit in the card's terms and conditions. If you want to aim for a higher credit limit, there are a number of areas...
Is $20,000 a good credit limit? ›
Yes, a $20,000 credit limit is good, as it is above the national average. The average credit card limit overall is around $13,000, and people who have higher limits than that typically have good to excellent credit, a high income and little to no existing debt.
What is a good income to get approved for a credit card? ›
A good annual income for a credit card is more than $39,000 for a single individual or $63,000 for a household. Anything lower than that is below the median yearly earnings for Americans. However, there's no official minimum income amount required for credit card approval in general.
How is the credit card limit calculated? ›
Banks decide your credit limit based on several factors, including your income, expenses, and credit history. Hence, your credit card eligibility is critical in determining your card limits. To compensate for their lenient criteria, banks typically offer lower credit limits and higher finance charges.
How do credit card companies decide your limit? ›
A credit limit is usually determined by reviewing factors like credit score, credit history and debt-to-income ratio. A higher credit score and positive credit history may cause a lender to set a higher credit limit. Credit utilization and credit mix also tend to be considered when lenders determine a credit limit.
What determines spending limit on credit card? ›
A credit limit is the amount of credit a lender grants you on a credit card or other type of credit account. Lenders determine your credit limit by examining your credit history and financial information. You can typically only spend up to your credit limit until you repay some or all of your balance.
Who determines how much credit you are allowed? ›
Credit card issuers determine your credit limit by evaluating factors like your credit score, payment history, income, credit utilization and large expenses. By understanding what they're looking for, you can manage your credit responsibly and increase your odds of getting approved for a higher credit limit.
How is credit card limit assessed? ›
To determine your credit limit, a lender will look at various factors including credit history, income, employment status, and overall financial situation. They assess these factors to determine a borrower's ability to repay the debt and then assign an appropriate credit limit.
How do credit cards decide to increase limit? ›
Your credit card issuer may decide to increase your credit limit because of changes in your financial situation or improvements in your credit scores. Or you could request an increase yourself. A lender isn't guaranteed to give you an increase when you ask for one.
