I still remember the day when I first receive a call to increase the credit card limit of my first credit card. But I rejected to avail that feature and keep my credit card limit as it was. Actually, initially I was not that much comfortable using credit cards, I used to think that I could spend beyond my limit.
But, one incident of my life changed my perception towards the usage of credit cards. Frankly speaking, by default, most people don’t realize the benefits of having a credit card. And on top of that why you should increase the credit limit of your credit card, even though there are certain risks involved in that.
My Realisation – Why A Credit Card Is The Best Source of Emergency Fund
Anyway, let me explain the story what has changed my perception towards credit card usage. It was back in 2013 when I was in Hyderabad. All of a sudden my father in law was hospitalized and immediately he was shifted to Kolkata AMRI hospital.
I joined them immediately to support them. But at the hospital, they asked me to pay around 50,000 up front as it was a major operation. I don’t have that much cash with me and at that time I used my credit card to pay that amount. At that time my credit card limit was around 70,000, I think.
Although we are trying to arrange money quickly, as the entire operation cost was almost 4 lakhs including many other expenses, majorly traveling. But due to ATM card limit and other problems it took some time to arrange the cash, even we have the amount in the savings account of my in-laws.
One more point I realized that day, I should have included my father-in-law in my company mediclaim policy as a dependant. In that case, such big expense was easily covered by the corporate health insurance policy.
So, that incident taught me a couple of things. And here are my learnings..
- You should have a good credit card with a higher limit. As a credit card is the best source of emmergency fund.
- In case you got a call to increase your credit limit, think twice whether you really need to increase the limit. E.g. in my case I should have increased the limit. At least I could have handled that emergency little better.
- If you have not added your parents or in-laws under health insurance, then you should do it immediately. Add parents/in-laws as dependent health insurance. There are many good family floater health insurance policies available in India these days. You should not avoid that point, as their health can deteriorate anytime and you never know how much cost you have to bear to overcome that.
Key Benefits of Increasing Credit limit of Your Credit Card
Generally, people avoid having a high credit limit credit card to avoid unusual situations like lost of credit card or credit card theft etc. But I think one can’t control this kind of situations. Even if you have a lower limit credit card, in case of theft of your wallet, you will lose many important documents like Aadhaar card, PAN card, debit card etc.
Few of friends say they can’t control their expenses when they have a credit card with a higher limit. Basically, this kind habit is very common for newbie people who apply for a credit card for the first time. But you are a responsible person of your family, handling the personal finance of your home then I am sure this is not at all a problem. You should learn how to avoid spending money on unnecessary staffs. This will help you to save more, invest more.
So, even you can find 100 reasons not to have a credit card, here I will highlight few points, which will help you to understand why you need a credit card with a higher credit limit.
Want to Improve Credit Score?
Don’t think that with a higher credit limit, your credit score will increase directly. Actually, it is good to have a higher limit credit card for those people who are using a credit card regularly and also never cross the credit limit & pay bills without missing the due date.
This will create a good impression over the period of time and your credit score will improve. I hope you know the importance of credit score in today’s world.
Personally, I use my HDFC Regalia credit card for almost every online transactions, petrol pumps, Grocery shopping, restaurants etc. My purpose is to avoid using the cash. But my spending is always as per my need and before billing due date I used to pay my credit card bills. This way I am earning huge reward points and trust from the bank also.
Best source of instant emergency fund
This is one of the most beneficial point I believe. If you need some urgent cash, then who will provide you that? A credit card can solve your problem in such a scenario in case if you have a high credit limit.
I have already shared my story and my learning from that incident. Even if you have good friends who can easily arrange cash in the emergency, but think logically what if they are staying in different cities or that day is a bank holiday or the ATMs in your area are not working.
Even if you have surplus cash in bank savings account, you will not be able to arrange cash in the emergency. But if you have a credit card with a higher limit you don’t have to wait for anyone. Simply pay the amount directly.
I can understand that that hospital may not accept card payment etc. But I think we are not trying to explore probable cases, rather what we can do to make our life easier.
No Need To Carry Multiple Credit Cards
Many people have a tendency to carry multiple credit cards to avail various benefits. If your purpose is to carry emergency cash only, then it is always good to have a single credit card with the higher limit of credit.
It will help you to stay away from the hassle of carrying a heavy wallet and off-course managing multiple cards online also.
But if you can manage multiple credit cards properly, then definitely having more than one credit card with specific benefits like travel credit cards, fuel credit cards, cashback credit cards etc will help you to avail many benefits in your everyday life.
Earn more rewards and special cashback offers
Banks generally consider their credit card holder customers carefully as they know that those are their premium customers. And on top of that if you have a high credit limit with regular spending records, then you may get special treatment as well.
Generally, banks offer various reward points, special coupons or cashback deals compared to regular customers. E.g. a regular credit card user may get 2X rewards, where a good customer with good spending records and the higher limit may get special rewards with 5X benefits as well.
More loan eligibility
Similar to the previous point, if you apply for any kind of loan like personal loan, home loan etc from the same bank you have the credit card, you will get special treatment. You can also ask for the loan against your credit card with the higher limit.
Although, I never prefer a personal loan or loan against credit cards. The reason is simple, you have to pay a very high-interest rate in case you avail loan against credit card or you withdraw money using your credit card.
Anyway, by default, if you have a credit card with high credit limit your loan application eligibility will increase and the process will be smooth. Get ready to get regular calls for loans, in case you have not opted for DND or do not disturb service.
Everything has its pros & cons. It’s us who actually decide why to have that product. Similarly, a credit card is a very good way to have an emergency fund always ready in your wallet. But if you don’t know how to control your emotions or spending nature, then it may hit your back with a huge debt.
Personally, I hold a credit card with high credit limit with the sole purpose of creating an emergency fund. I also hold other credit cards to avail specific benefits like shopping, travel etc. So, if you have any question regarding credit cards then you can write a comment below. In case you like my article useful, please share this article on Facebook, Twitter & other social media.