new Delhi. Nowadays the trend of credit card has increased a lot. This is the preferred method of payment for shopping. Some credit cards offer interest-free credit to their customers for up to three months. This is the reason why many people shop openly with the help of credit cards. But, do you know that if you make full use of your credit card limit, then what is the harm?
Credit limit is the limit up to which the credit card holder can spend the maximum amount on his card. The credit limit is decided on the basis of the benefits and features of the credit card. There is no universally accepted method of determining the credit limit. The bank has the right to fix the limit. For this, different banks adopt different criteria.
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Credit score can be bad
Experts say that do not use your credit limit fully. The credit utilization ratio increases when the credit limit is fully utilized. This can spoil the credit score of the credit card holder. This may make it difficult for you to get a loan in future. Credit scoring agencies determine the credit utilization ratio. This shows the credit or borrowing of the cardholder.
Credit limit may decrease
If a credit cardholder repeatedly reduces the credit balance to zero, then the bank also reduces the credit limit of such a customer. They do this because they feel that later on this customer can also default. If the credit limit decreases, then the credit score automatically decreases. The credit score should not be kept at zero for a long time. If a customer does this for a long time, then the bank has the right to deactivate his card.
negative effect on image
If a cardholder continuously zeroes his credit card balance, then it has a negative impact on the financial image of the cardholder. This gives banks and credit score agencies the impression that the cardholder is too expensive and does not know how to manage the expenditure.
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Like the credit limit, the credit card also has a cash limit. This means that how much cash you can withdraw from the credit card. The balance of this limit should never be zero. If you do this repeatedly then your credit score will be affected. This will make it difficult for you to take loans in future.
Tags: credit card, credit card limit, Personal finance
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