What is Credit Card Limit and why does it matter | AU Small Finance Bank
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What Is a Credit Card Limit, and Why does it matter?

    A Credit Card enables you to instantly borrow money up to a pre-approved limit to pay for goods and services. The card can come in handy while making more significant purchases and meeting financial emergencies. If you're new to Credit Cards, one aspect that deserves your utmost attention is the credit limit. Let's take a detailed look at what is a credit limit on a Credit Card.

     

    What is Credit Card Limit?

    The Credit Card limit is the maximum amount cardholders can spend on their Credit Cards. So, for instance, if your Credit Card limit is INR 50,000, you're not allowed to spend more than INR 50,000 on your card. The credit limit varies for different users. 

     

    How do Banks determine Credit Limits?

    To better understand a credit limit and how it works, you should also be aware of the factors banks consider while fixing an applicant's card limit. Take a look at some of those factors below.

    • Income: The higher the monthly/annual income, the higher can be the card limit. 
    • Age: It is a vital criterion for fixing credit limits. 
    • Loans or Liabilities: As existing loans and EMIs can increase the risk of defaulting, the credit limit can be lower for applicants with one or more existing loans. 
    • Repayment Capacity: Factors like monthly expenses impact the repayment capacity of applicants that banks analyse to fix the credit limit. 
    • Credit History: The credit score and credit history helps a card provider determine an applicant's creditworthiness. 
     

    How to Check Credit Card Limit?

    For instance, AU Credit Card users can log into their AU 0101 App/NetBanking and visit the Credit Cards section to check the credit limit. Other than this, one can check in the following ways:

    • Welcome Kit 
    • Monthly Credit Card Statements or
    • Customer Care
     

    Total Credit Limit VS Available Credit Limit

    The Total Credit Limit is the maximum usage limit set by the card provider. On the other hand, the Available Limit is the deduction of your spending from the Total Credit Limit. 

    For instance, if the Total Credit Limit of your Credit Card is INR 50,000 and you purchase INR 10,000 with your Credit Card, then the Available Limit will be INR 40,000. 

     

    Credit Card Limit and Credit Score

    The credit score is a 3-digit figure, ranging between 300-900, that describes the creditworthiness of an individual. In India, credit bureaus like CIBIL TransUnion, Equifax, Experian, and CRIF High Mark compute individuals' credit scores. When you apply for a new Credit Card, the bank will check your credit score before approving or declining your card request. 

     

    How to Increase Credit Card Limit?

    Here are some tips that can help in increasing your Credit Card limit:

    • Clear Credit Card bills in full and on time
    • Try to keep credit utilization low
    • Repay existing loans
    • If your income has increased, provide evidence of the same to the card provider
    • Try to improve your credit score
     

    Impact of Spending Above Credit Card Limit

    Spending above the Credit Card limit can result in a Card providers can levy a penalty

     

    AU Credit Cards for Ultimate Shopping Experience

    AU Small Finance Bank offers an exciting range of Credit Cards, including LIT, Altura, Altura Plus, Vetta, and Zenith.

    With features like Accelerated Reward Points, Cashback Benefits, Complimentary Device Insurance, Lifestyle Privileges, Xpress EMI, and more, AU Credit Cards can be your perfect shopping companion. 

     

    FAQs

    1. Why Does a Credit Limit Matter?

    Understanding credit limit and how Credit Card limit is determined is essential as the limit defines the maximum amount you're allowed to use with the card. Spending above the limit can have severe consequences. 

     

    2. What is the Average Credit Score by Age?

    In India, the average credit score for a 25-year-old individual is 660^. Building a high credit score requires years of discipline and excellent credit management skills.

     

    3. Does Credit Limit Reset After Payment?

    Yes, when you clear the total outstanding balance of your Credit Card, the credit limit goes back to the original amount. The credit limit will be adjusted accordingly if you only make the minimum payment.

     

    ^Source: https://www.creditmantri.com/forum-what-is-the-average-credit-score-for-a-25-year-old/