How do issuers calculate Credit Card limit? An easy guide

Issuers set the maximum credit card limit in India by considering a number of factors. You can only make transactions within this specified limit. So, knowing how financial institutions determine this limit is crucial. 

Remember, the maximum limit in India varies across issuers and individuals as it is based on:

• Internal policies of the issuer
• Your creditworthiness 

Guide to Credit Card Limits

This is the maximum amount that you can spend using your credit card in a billing cycle. Here are some essential facts that you need to be aware of:

• The issuer establishes the limit after scrutinising your credit profile and various factors that impact your creditworthiness. 
• When you make purchases using your card, the amount you spend is deducted from your total credit limit. 
• On clearing your bill in full, the limit is restored, allowing you to use it again in the next cycle. 
• Exceeding your predetermined credit limit can negatively impact your credit score and increase your interest rate on the outstanding amount.

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What Factors Do Credit Card Companies Consider to Determine Credit Limits?

These are a few essential parameters that issuers assess to calculate your eligible limit:

Income and Employment

This is a significant factor that helps issuers determine your limit. They pay close attention to these points:

• Monthly and annual salary
• Stability of the income and employment
• Reputation of the company you’re working in
• Length of employment with the company
• Type of employment, whether it’s full-time or temporary
• Sector and industry your company belongs to

Spending Pattern

Issuers also check your financial capability, as this helps them assess if you’re a responsible borrower. Here’s what you need to know:

• If you clear your bills on time, issuers consider you as a responsible individual
• If you exhaust almost all of your funds at the end of the month, issuers perceive you as credit-hungry and may doubt your repayment capability

Debt-to-Income Ratio

This is the ratio that compares the debt you owe to your total income. You have low liquidity for a new debt if you owe a large amount against your income. 

As such, credit card companies may not provide a higher limit due to the increased risk of non-payment of the bill. Here’s how you can reduce your DTI ratio:

• Avoid applying for more loans and credit cards
• Create a strategy to settle your dues
• Increase your monthly payments towards your debts to speed up your overall debt repayment
• Ask your creditors about lowering your interest rates and use the savings towards debt repayment
• Explore additional opportunities to increase your income

Credit Repayment History

Your credit report reflects your repayment pattern and allows issuers to determine the risk associated with extending credit to you. Here’s what a credit report includes:

• Personal details such as your name, address, contact details
• Credit accounts like loans and credit cards, along with their repayment status
• Public records such as liens, bankruptcies and judgements, if applicable

A good credit score and a spotless repayment track record indicate that you are a low-risk borrower and, hence, issuers may offer a higher credit limit. 

Also Read: Learn To Use Credit Card Responsibly

Credit Utilisation Ratio

This refers to the amount of credit you have used against the total available limit. A high ratio indicates an overreliance on credit, making you a high-risk borrower. Therefore, issuers may not sanction a higher limit. A ratio under 30% can boost your chances of getting a better limit.

Here are some ways to improve it:

• Keep a check on your unnecessary purchases
• Pay off your loan EMIs, credit card bills and utility bills on time
• Track your expenses on a regular basis
• Do not close your unused credit card accounts

What is a Good Credit Limit?

The maximum credit card limit in India shouldn’t exceed thrice your current monthly income. As such, there is no good credit card limit, as it depends on the personal finances of each cardholder. What’s suitable for you may not be ideal for others.

Here’s how you can assess if the limit is ideal for you:

• You can cover all the payments through your credit card that you had originally intended.
• Your credit utilisation ratio remains below the mark of 30%.
• You don’t find it difficult to repay the credit card bill on the due date.

How to Check Your Credit Card Limit

Follow these simple tips:

• Check it on the documents that your issuer provided when your application was approved.
• Contact the representatives of your credit card issuer by visiting the branch or through their customer care team. 
• Open your credit card account on the issuer’s net banking portal or the mobile app app and log in to know the limit.
• Go through your latest credit card statement to check the credit limit.

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FAQs on How Credit Card Companies Determine Credit Limit 

What is the credit card limit for a salary of ₹40,000?

Issuers calculate credit card limits through different methods. It’s generally 2 – 3 times your current monthly income. If your salary is ₹40,000, your credit limit may be between ₹80,000 to ₹1.2 lakhs. 

What is the credit card limit for a salary of ₹50,000?

The maximum limit in India for a salary of ₹50,000 usually goes up to ₹1.5 lakhs if the issuer uses the 3X calculation. However, this also depends on your:

• Age
• Credit score
• Existing obligations
• Debt-to-income ratio
• Credit utilisation ratio

What is the credit card limit for a salary of ₹30,000?

The minimum and maximum limit on a ₹30,000 monthly salary is based on a variety of factors. However, the minimum credit card limit in India is 2 times your monthly income and the maximum can be 3 times. This comes to a credit limit between ₹60,000 and ₹90,000. 

What is the credit card limit for a salary of ₹25,000?

It starts from ₹50,000 and extends up to ₹75,000 if the card issuers use the 2X – 3X method of calculation.

What is the credit card limit for a salary of ₹18,000?

If a person has a salary of ₹18,000, the credit card limit they can enjoy may range between ₹36,000 and ₹54,000, i.e., 2X to 3X of their monthly salary.

How to find the credit limit of a credit card?

Here are different ways to do it:

• Refer to the documents provided by the issuer post approval of your card
• Contact the issuer’s representatives by visiting the branch or through their customer service team
• Access your credit card account through the issuer’s online banking portal or mobile app
• Review your most recent credit card statement

How much credit limit should I have based on my income?

The minimum credit card limit in India is generally 2 times your monthly income, and it can go up to 3 times.