When you apply for a new credit card, you’ll notice that each card will come with something called a credit limit: the maximum amount you can spend on that card in any given billing cycle. For most part, the initial limit set by the bank is out of your control, but there are ways to influence it!
Why Increase It?
There are various reasons why you’d consider increasing your credit limit. Better spending power is one motivation. A comparatively lower credit utilisation rate is another, since this will result in a better credit score. Of course, there’s also the lowered risk of maxing out your credit card whenever you head out on a spending spree (but please don’t do this if you’re still learning how to manage your debts!).
Temporary Credit Limit Increase
What you might not know is that your credit limit can actually be increased temporarily, albeit only for a few specific reasons. So no, you won’t be able to request a temporary increase in order to impress your date at dinner! A temporary credit limit increase can usually only be requested if you need to swipe your card for hospital or overseas transactions. This request will be processed over three working days, is not instant, and will be readjusted to your original credit limit.
Permanent Credit Limit Increase
Although the initial credit ceiling of your credit card is set by your bank based on your credit worthiness, there are ways to request for a permanent increase if you keep an eye out for these golden timing nuggets:
Consistent Good Paymaster
Banks are more likely to allow you more credit if they see that you’ve been consistently and responsibly clearing off your debt every month. Therefore, make sure you’ve been polishing off all dues when you receive your statements every month for at least a year before you apply for a credit limit increase. Then again, you’re supposed to be paying it off diligently anyway, so this tip might just be a matter of time.
When You Get a Pay Raise
Performance appraisals are usually when you get a pay raise. That’s good news because you have more disposable income at hand – and it also makes you more attractive to banks. You’ll need proof of your pay raise, such as a few months’ worth of pay slips, or your EPF statement, or your EA form, in order to apply for a credit limit increase this way.
When Your Debt is Low
Low debt plus higher income equals better credit utilisation ratio. It makes it appear as though you have more disposable cash to spare, and banks would love to get you to spend more. So if your debt is low, your credit health is in the pink, and you think you can handle more credit, now’s a good time to submit that request.
Even if a credit limit increase sounds possible for you, don’t jump into it just like that! If banks end up deciding that you’re not ready for more credit, their rejection will hurt your credit report, so think carefully before you proceed with that application.