• Credit card limit higher than salary?


• Why do banks offer higher credit limits?


• Understand Banks’ ‘Ha’ Game Plan

Credit Card Limit: Be it movie tickets, online shopping or buying something on EMI, everyone uses credit cards a lot these days. But have you ever wondered why people are using credit so much these days”text-align: justify;”>The credit card craze is growing rapidly among the youth these days. Cashback offers, attractive offers and free lounge access attract youngsters. Therefore, it is important to understand how to use credit cards and what to avoid.

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Why do banks offer higher credit limits?

We have often seen that banks offer higher credit limits than salary. But have you ever wondered how banks can offer a credit limit of up to Rs 70,000 on a salary of Rs 50,000? In fact, banks consider a customer’s credit score, payment history and overall financial status in addition to salary. But behind all this, banks consider another factor: their own profit, which they get from interest and merchant commissions. Credit card companies make profits by offering higher limits. If you use the limit and pay the bill in full on time, the bank gets a commission from the merchant. If you fail to pay the bill in full, the bank earns revenue through higher interest and late fees.

How much should you spend?

If you are using a credit card, you should limit your incoming salary to 30% so that you do not face any problem while paying the bills. If your incoming salary is ₹60,000, you should ideally spend up to ₹18,000 on your credit card. According to experts, you should never spend more than 30% on your credit card, as it can damage your credit score and make it harder to pay bills.

Is Paying Minimum Due Right?

The simple answer to this question is ‘no’. Paying the minimum due is never appropriate. This benefits the bank, but the customer gets caught in the trap of interest. So, pay the full amount due every month. Banks may charge late fees and interest for paying only the minimum due, which can make it even more difficult to pay in the following months.

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