Skip to main content

Your Credit Limit on Credit Card?

Apply for Credit Card Online


Just keep in mind that credit bureaus take the credit utilisation ratio into account: higher the ratio, lower the score
 
Devendra Kumar spends almost `40,000 on his credit card every month. Though he also pays off the entire bill on time, the high credit utilisation of almost 80% (his credit card limit is `50,000) is a red flag for lenders. It implies that he is at the risk of maxing out his card limit and could have trouble repaying the due amount. Credit bureaus take the credit utilisation ratio into account when calculating an individual's credit score. A high credit utilisation ratio means a lower score. A credit utilisation ratio of 20-30% is preferable. In case the ratio is higher, the applicant is seen as credit hungry. It is possible that banks would charge a higher interest on loans to such individuals because they are seen as risky customers.

Now, if Kumar's card's credit limit is increased, his credit utilisation ratio would come down. For instance, if the credit limit was `1.5 lakh instead of `50,000, Kumar's credit utilisation ratio for spending `40,000 a month would be 27%. Most banks revise the credit limit from time-to-time based on the user's repayment history , transactions, outstanding loans and rise in income. A cardholder can also request the issuing bank for a hike in credit limit. There is usually no additional cost involved, though an increase through a card upgrade may attract charges.

THE BENEFITS

BETTER CREDIT SCORE

A lower credit utilisation ratio improves the card holder's credit score, making him a less risky customer in the eyes of the lender. A higher credit limit can also be used as a bargaining tool to get a bigger loan from the issuing bank.

HELPFUL IN EMERGENCIES

A credit card with a big limit comes in handy during emergencies like a sudden hospitalisation where large payments have to be made upfront.

MORE BUYING POWER

A card with a higher limit makes big purchases, like white goods for the home, easy to make.

THE DEMERITS

ENCOURAGES RECKLESS SPENDING

It is a bad idea for compulsive shoppers who can easily throw their budget off track by recklessly buying with their credit cards. This again has a negative impact on the credit score.

SECURITY RISK

If the safety of the card is compromised, the damages can be high. To mitigate the risk of fraud, users should set up alerts whereby the bank informs them when a transaction that does not match their usual spending pattern is noticed.

HIGH INTEREST OUTGO

As the increased credit limit can also mean greater spending, the chances of the card holder being unable to repay the amount in full in a month also increases.This translates to high interest outgo.

Another way of increasing one's credit limit is by opting for multiple credit cards. However, there are pitfalls here too. You will spend more and there is a high chance of default if you cannot manage payments and credit period well. This will negatively impact your credit score. A single credit card with a higher limit is a better solution. You will also save on annual fees of multiple cards.

-----------------------------------------------
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds

Top 10 Tax Saving Mutual Funds to invest in India for 2016

Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

-----------------------------------------------

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...

Perpetual SIP - Its Advantages

Retail investors have taken a fancy to investing in mutual funds through systematic investment plans (SIPs). As per industry estimates, Rs 4,000 crore flows into SIPs every month. One way to take advantage of SIPs in a true long-term manner is to opt for a perpetual SIP 1. What is a perpetual SIP? In an SIP , you make periodic investments in a mutual fund scheme of your choice generally every month for a pre defined tenure. While signing up an SIP mandate , you have the option to leave the end-date column blank. If the column is blank, it means the investor has opted for a perpetual SIP . Most fund houses assume this SIP will continue till December 2099 unless you give a written communication to stop it. However, some fund houses require you to tick the `perpetual option'. 2. What are the advantages of perpetual SIPs? Registering an SIP involves a lot of paperwork and it takes time. It is observed that many investors skip their SIP instalments when they go for short-tenure option...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now