You might have asked this question to a number of bank employees, “What will be my credit limit if I apply for this card?” and everyone will say that they have no idea. One reason is that bank discourages their people in exposing this limit to customers, another reason is that there are quite a lot of factors affecting the bank’s decision which the salespeople can never understand.
Below are some of the factors influencing your credit limit when you apply for a new credit card.
Major Factors Influencing your Credit Limit
The usual credit limit is 2X or 3X of your monthly income. Suppose your salary slip shows Rs.50,000 per month, you can expect Rs. 1 Lakh – 1.5 Lakh credit limit. For self-employed, suppose you’ve filed an income of Rs.5 lakhs for the last financial year, you can expect 1 Lakh – 2 Lakhs as credit limit as Business cards usually get better limit for obvious reasons.
Your CIBIL Score:
Everything should be fine if your CIBIL score is 750 or above. The lower score might lower your limit even though your income might be high. Any existing defaults found on your other Loan accounts/credit cards might affect your expected credit limit negatively or maybe even reject your application.
Your Portfolio with the issuing Bank:
This is very important if you’re requesting a credit card based on your savings/salary account transactions. HDFC/AXIS credit cards are easy to get this way, provided you have a good amount of transactions on your account every month. Banks not only see your transactions but also other products availed from the bank. Suppose you’re using FD/RD/insurance plans from the same bank, you’re likely to have higher relationship value with the bank, and so your credit limit.
Hard Enquiries with another bank:
If you’ve requested credit cards/loans with 5 banks all in the same month, this will not only reduce your CIBIL score, it will also show your credit hungry behavior and this might reduce your expected credit limit.
If your monthly income is Rs.50,000 and if you’re paying monthly EMI of Rs.30,000 on your home loan, this will give a huge blow on your expected credit limit as your cash flow gets reduced by half and so your ability to pay bills. So the bank knows that you’ve got only Rs.20,000 left for spending and you cannot expect a limit like 1 Lakh or so.
Hope that helps you to understand what banks look at before setting a credit limit for your card.
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