Increasing Your Credit Limit is a Bad Idea?
There are several disadvantages to making regular credit card payments and taking a personal loan. If you do this continuously for 6 to 12 months, you will definitely get a call from a bank executive.
The call will either be to increase your credit limit or to pressurize you to take a personal loan. Their danger is understood in different ways.
Increasing Your Credit Card Credit Limit
If you are not able to pay the credit card bill on time, then you will have to pay a huge amount. It has an annual interest of 36 to 45 percent. With such a high interest rate, you have to pay off the credit card in full, which is a hassle for everyone.
You save yourself trouble by increasing your credit limit. Note that you also need to increase the credit limit or you are just being fooled.
This is also because the higher the credit limit, the higher the spending habit. That’s why it would be better to work within the existing credit limit only.
If your credit limit is high then your mind may be tempted for an expensive holiday or any electronic item. Keep in mind, you will have to pay. If you get a call from the bank to increase your credit limit, decline it.
Another disadvantage is that when you take a home loan or education loan for any urgent reason, the bank will tell you that your credit limit is already overstretched.
This can hinder you from getting the loan. And if the limit is high and you default on it, then it can lead to a deterioration in your CIBIL score.
Increasing Your Personal Loan Amount
If you have honestly paid all the installments of your personal loan, then surely you will get a call from the bank executive to top-up your loan.
It may be that along with the interest rate of 14 to 20 percent, processing fees are also attached. This is one costly loan that should be avoided at all costs.
Be careful while attending the call of the bank. Obviously this type of call is for loan, credit limit or mutual fund.
Use your mind and attend such calls only in special situations. Keep in mind that you will have to pay this amount only. So be careful and don’t hesitate to say no.
