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Credit Card Tips: When should you increase your credit card limit, what should you keep in mind...

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One of the most important things in using a credit card is the credit limit. The higher the limit, the better it is for the person using the card. This eliminates the need to look for alternatives while making big expenses like international airline tickets, hotel bookings, etc.

If spent without any planning, it can cause some problems. One feature that many banks are taking advantage of is offering higher credit limits to their customers. It is important to analyze such offers on various parameters before making a decision.

Limit and increase
One of the things that one should keep in mind is the current limit on the credit card and the increase being offered. If the current limit is low and the increase is good, then it can be a good offer. For example, if the current limit is Rs 2 lakh and it is being offered to increase to Rs 2.5 lakh, then it is a good increase. Sometimes the figure can be just a little more than the limit.

If the current limit is Rs 4.5 lakh and is being raised to Rs 5.25 lakh, the percentage increase may not seem like much but it may help the card user as it will take the expenditure above Rs 5 lakh. This will allow you to use just one card instead of multiple cards. This has to be seen from the cardholder's perspective to see if it suits their needs.

Documents required
The process for availing higher credit limit is to be looked at further. The best case scenario would be if your bank allows it without any additional information and income proof. They may do so based on the card's usage and repayment history or their relationship with the cardholder.

This does not require any extra effort from the cardholder. On the other hand, if a lot of documents like income proof and other details are to be filed, the decision will be based on benefits and effort. If there is no immediate need for a higher limit, it may be less attractive.

Cost consideration is also important
The cost of the entire exercise should also be considered before arriving at a decision. In most cases, banks do not charge for higher credit limits and there is a process to increase it. This is beneficial for the card user as if they do not do so, they do not have to pay any money.

On the other hand, if there are charges involved, one must check if it is worth the cost. Many banks charge a processing fee for such upgrades. So, it is important to check before making a decision.

What to do overall
The best way to analyze this situation is to look at such offers from the perspective of both need and cost. If a higher limit is required, then such offers can be ignored. Also, higher limits should not be used for excessive or reckless spending. This can put a strain on your finances.

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