What is credit card limit and how is it determined?

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 down credit card eligibility criteria during 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 the credit 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.

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 circumstances. 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.