How You Can Manage Your Credit Card Limits in UAE

Using credit cards demands more than just understanding their benefits and rewards — you must have a nuanced comprehension of credit card limits. These financial thresholds, set by card issuers, hold a significant influence over your purchasing power and credit health.

In this article, we will dive into the art of skillfully managing your credit card limits, a crucial facet of maintaining a strong financial foundation.

Exploring the delicate balance between utilisation and available credit, we will uncover the factors that shape credit limits and the consequences of exceeding them. From the pivotal role of credit scores and income levels to the impact of outstanding balances, we will also unveil the intricate web that determines your credit limit. Lastly, we will find out strategies to optimise your credit card limits, enhance your creditworthiness, and secure a stronger financial future.

So let’s get to learning the basics of credit card limits and equip ourselves with the knowledge to wield this financial instrument effectively!

Understand Your Credit Card Limit

Credit card limit refers to a pre-decided purchase limit set on your credit card. It is the maximum limit up to which you can make purchases using your credit card.

Credit card companies and banks evaluate various factors such as your age, monthly salary, current debts, credit history, payment history, and aecb credit score to determine your credit card’s limit. Moreover, the specific card that you opt for and the internal policies of the lending institution also influence the approved credit limit.

It’s worth noting that while lenders set credit limits, they are not fixed. By practising responsible credit card usage and effective debt management, you can enhance your credit score and potentially receive a higher credit limit.

Being aware of your current credit limit is vital for managing your spending and debt ratio. Regularly surpassing the credit limit could lead to lower credit scores, making it challenging to secure loans in the future.

Difference Between Total Credit Card Limit and Available Credit Card Limit

There are two types of credit card limits - total credit card limit and the available credit limit. Let’s understand them better.

• Total Credit Limit - Your total credit limit represents the maximum credit that you can use with your credit card. If you exceed this limit, your card issuer may impose over-limit charges.
• Available Credit Limit - Your card's available limit, on the other hand, denotes the portion of your total credit that remains unspent or unused at any given moment.

How Does Your Credit Card Limit Affect Your Credit Score?

As you make purchases with your credit card, a portion of its total available limit is utilised. This determines your credit utilisation ratio, representing the percentage of your credit card's total limit that you use.

Credit card providers periodically share details about your limit and utilisation with the credit bureau, which uses these details to calculate your credit score.

In general, a lower credit utilisation ratio contributes to a higher credit score, assuming other factors like timely payments and a diverse credit mix are positive. Essentially, using a smaller portion of your available credit is advantageous for your credit score.

How to Check Your Credit Card Limit?

Curious about how to verify your credit card limit? The process is a straightforward and uncomplicated one. Here's a rundown of the top ways to assess your credit card limit -

Method 1: Through Net Banking

You can easily access your credit card limit via your bank's net banking portal. Log in using your credentials, navigate to the credit card section, and select the card you want to review. The 'Credit Card Account Summary' will display the card's maximum credit limit.

Method 2: Via Customer Care

You can also dial your bank's credit card customer care number to swiftly retrieve your credit limit details. After confirming your identity with a customer care representative, they will provide you with this information.

Method 3: SMS and Missed Calls

Certain lenders offer quick credit limit checks through SMS and missed calls. Lenders have distinct SMS codes, often made up of a dedicated string followed by your card's last digits. Similarly, you can verify your credit card limit with a missed call from your registered number if your lender supports this feature.

How to Increase Your Credit Card Limit?

Understanding how to increase your credit card limit starts with recognising the role of your credit score in determining this limit. A higher credit score translates to a higher available credit limit. Boosting your credit limit, thus, becomes achievable by taking steps to enhance your credit score.

The steps involved in improving your credit score include the timely payment of credit card dues within the specified due date, ensuring on-time repayment of EMIs for other loans, prompt rectification of any errors in your credit report, and more.

Here are some more tips -

• Exercise Prudent Card Usage - Your credit utilisation ratio significantly impacts your credit limit. This ratio reflects the proportion between your card limit and monthly spending. Ideally, you should cap your monthly card expenditures at 30% of the credit limit. Maintaining this ratio signals responsible financial management, portraying you as a low-risk borrower.
• Timely Bill Settlement - Lenders anchor your credit card limit to your AECB score, and nothing bolsters your score more than punctual payments. Clearing your outstanding credit card dues entirely before the due date automatically enhances your credit score, prompting lenders to consider a limit increase.
• Connect with Your Lender - Directly communicate with your card issuer to request a credit limit augmentation. However, be prepared to provide substantiating evidence for your appeal. For instance, if you are seeking a higher limit due to a recent salary raise, have your new payslips on hand.
• Apply for a New Card - If you consistently meet bill payments and maintain a healthy credit utilisation ratio, you could qualify for a new credit card with an increased limit. By combining both card limits, you gain access to a higher overall credit limit.

Benefits of Increasing Your Credit Card Limit

Discussed below are the key benefits of managing your credit card limit and increasing it eventually -

• Enhanced Emergency Funds - As life's uncertainties can often catch us off guard, having an emergency fund is always a wise decision. Amidst such unforeseen situations, credit cards can also prove valuable. With a higher credit limit, you can have access to more credit in an instant, which can be helpful in navigating emergencies.
• Boosted Credit Score Repair - A raised credit limit correlates directly with an improved credit score. This can be advantageous for debt consolidation and make it simpler to access loans in the future. With a higher limit compared to your usual spending, you can easily keep your credit utilisation ratio below 30%.
• Attractive Borrower Profile - An elevated credit score places you in a favourable position with lenders, showcasing your adept financial management skills and creditworthiness. This facilitates easier loan approvals and secures lower interest rates.
• Preferable to Obtaining a New Credit Card - Getting a new credit card may inadvertently shorten your credit history length. Credit history calculation considers the ages of old and new accounts, along with the average age of all accounts, and impacts your credit score calculation as well.

Instead of the hassle of acquiring a new card, you can thus opt for increasing your existing credit card limit.

Making the Most of Your Lower Credit Limit

At times, banks and other credit card companies may not increase the credit limit owing to their internal policies or your credit score. However, if you want to make some major transactions due to a lack of cash, you can use the following options -

• Apply for a new credit card - With a wide selection of excellent credit cards available in the UAE, you can certainly consider getting a new one. However, considering the importance of choosing the right card owing to its fees, interest, and more, make sure to compare the top options when deciding.
• Consider getting a loan - If you are planning to buy something and pay it off gradually, a loan could also be a suitable option. Loans can increase your credit product diversity without affecting your debt-to-credit ratio, as they differ from revolving credit products. This might even help boost your credit scores. 
• Explore layaway options - Several large retailers provide layaway programs, allowing you to secure an item with a cash deposit and then clear the remaining balance over time. Once fully paid, the item is yours. These programs don't involve credit checks but may have minor fees.
• Opt for incremental payments - Shopping channels and some major retailers offer payment plans where the total cost is divided into a few equal payments. These payments could be significantly lower than your (recently decreased) credit line, reducing any impact on your credit scores.

How to Ensure that Your Credit Limit Does Not Lower Down?

While you might not have control over economic shifts or a credit issuer's internal choices, you can proactively take measures to reduce the risk of a credit line decrease for other reasons down the road -

• Start by engaging as an active credit user. Even making a small purchase with your cards regularly will prevent them from becoming inactive. This action signals to the issuer that you value the credit line and intend to use it, thereby discouraging any reduction.
• Maintain responsible conduct across all credit accounts. If late payments are an issue, opt for automatic bill payment to ensure punctuality. Aim to settle the full credit card amount whenever feasible. If your balance starts to rise, halt new charges and focus on quickly paying down the debt.
• If your monthly salary increases, contact your credit card issuer to update your information.
• Perform an annual review of your active credit cards and their usage. Each account should align with your spending requirements. You can add more cards if more credit is needed, as this can also minimise the chance of falling short in case of a credit line adjustment. Should your credit line be reduced, you'll be well-prepared to respond.

Frequently Asked Questions