Your credit card limit must be in sync with your spending and financial requirements. At the same time, it must be within your repayment capacity. As you continue to pay your credit card bill on time, you will be offered an enhanced limit. If you are one of those people who often overspend and exceed their credit card limit, then you must reassess whether to continue with the higher amount of their credit card or request for a lower credit limit to avoid spending beyond your affordability.
Requesting for a lower credit limit on your credit card may not directly affect your credit score in India. However, depending on how you manage your credit utilisation ratio, there may be some indirect impact on your credit score.
Your credit utilisation ratio is the amount of credit you use compared to the amount of credit available to you. Suppose you have a lower credit limit and continue to use the same amount of credit. In that case, your credit utilisation ratio will increase, which may have a negative impact on your credit score.
On the other hand, if you have a higher credit limit and use less credit, your credit utilisation ratio will be lower, which could positively impact your credit score.
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Adhil Shetty, CEO, Bankbazaar.com, says, “A good credit score means quicker and hassle-free approval of loans and credit cards, lower interest rates, easy approval of rented or leased houses, more negotiating power and higher loan limits.”
It is important to note that credit scores are determined by a variety of factors, including payment history, credit utilisation, length of credit history, and types of credit used. Requesting for a lower credit limit alone may not have a significant impact on your credit score, but it is always a good idea to manage your credit responsibly and maintain a low credit utilisation ratio.
The higher credit limit of your credit card does not mean that you exhaust it entirely. It is advised that your credit utilisation should not be more than 30%. At times when you exceed this limit, you must make sure to pay the bill on time and in full to avoid additional burden. The higher the credit limit, the lower the chances of exceeding your credit utilisation. But, if your still feel that higher credit limit forces you to spend more than your means, you can request your bank to lower your credit limit after assessing all the pros and cons.