When your credit card is approved, you receive with it a line of credit that the bank calculated according to the information you provided and according to your credit history. In the event that you have no history, the bank can use other parameters to determine the risk and be able to assign the amount of your line. Generally, when it is a first card, your credit line will be reduced and may increase over time.
The bank constantly makes evaluations of the lines of its cardholders and at any time you could receive a text message, email or phone call to accept the extension of your line, so there really isn’t much to do but wait.
Although, of course, you can also make that call to request the extension of the line without having to wait for the bank to do it for you, only that the extension will not occur immediately; The bank will generate a ticket and the corresponding area will be in charge of the approval, which you will be informed by text message or in a subsequent phone call.
In some cases the process can be more complicated and you will be asked to deliver a letter to your branch with the statement of reasons and then they will let you know the result of the analysis performed. On the internet there are many free formats to be able to make this letter, just look for the term “credit line extension”.
You must take into account some things, especially these two variables, very important:
- Your ability to pay
- The administration of your finances
Your ability to pay
The ability to pay is the money that, after having covered all the expenses you usually have, you have left to pay commitments such as debts or savings.
Generally, the proportion must be at least 30% of your income, that is, the new debt incurred should not be greater than this percentage so that paying it is not a burden.
The credit line is established so you can make purchases for 12 months; For example, if your available 30% in the month is $ 3,000 dollars, your line could be $ 36 thousand dollars. In this way you could buy products and defer your payments to this term and you could pay them comfortably.
The administration of your finances
If you are normally a good payer, you cover your card balance 100% and have no arrears, it is likely that expanding your credit line can help you get out of some unforeseen events when you need it or allow you to make purchases of more products without the fear that your line of credit becomes saturated.
But, if, on the other hand, you don’t have a good administration of your personal finances, and you constantly fall behind in your card payments, then it is likely that an extension of your credit line will only cause you to be major problems instead of benefits, so to request an extension of your line you have to have it well thought out and do a thorough analysis.
The approval of the extension of your line
A bank generates its profits by 75% through the use of credit cards. Among the income generated by the cards, a part is in the interest they charge for the loan of the money, but in addition to that, the higher income comes from the collection of penalties, commissions and default interest for late payments or payments partial balances.
There is a team that is responsible for analyzing the payment of the cards and making evaluations to be able to expand the credit line of a group of cardholders. A bank cannot extend a credit line without having previously analyzed the payment behavior of the customer. The extension should bring a benefit for both parties, on the one hand, greater comfort for the customer: an extension will allow you to make purchases of a higher average ticket; and, on the other hand, create a bigger business for the bank through more and better consumption.
The best analyst is you
The bank is always looking for the way in which customers can make greater use of their credit cards and for that reason they may not be so strict in their analysis to make extensions in the credits, all with the aim of increasing rapidly the placement of more credits.
For this reason I believe that the best analyst for the extension of a line of credit is you. You know what your income is and what your ability to pay is, what you need to acquire a debt is what your line of credit should be. For me the rule is: if 30% of your income is $ 3,000 dollars per month, only $ 3,000 dollars should be your line of credit, and no more.
What happens if I don’t want to expand but reduce?
Of course, you also have this option, and for this the bank’s approval is not required, with a simple call you can take your credit line to the amount you select and the bank has no option but to accept your request. In addition, it will be a line of credit that, with your previous analysis, will be the best for you and that it should not be a problem to pay comfortably, which is always convenient for a bank, which least wants to have an increase in their accounts delinquent
Take advantage of your card
Sometimes it seems inevitable to think that we cannot acquire something without requesting a loan, but it is a reality; Without the credits we obtain from financial institutions, we cannot buy many products, especially at the time we require them. Thanks to the competition that exists between the banks and more and more actors enter into the competition of consumer loans, interest rates have been reduced over the years, which allows us to have access to money that It is cheaper than before.
Therefore, it is important to use our card wisely and get the most out of it. I leave these tips provided by the Condusef.
● Always pay your debt before the established deadline: otherwise, you will be charged default interest, that is, an additional surcharge for late payment of the loan fee, plus normal interest.
● Do not have more than one credit card: this can generate a lack of control in your pocket, it is advisable to cancel those that charge higher interest rate or annuity.
● Whenever you can settle your debt: if this is not possible, at least double the minimum payment required.
Tips to use the minimum payment in your favor
● Pay the minimum only when you think it is for an emergency and you cannot cover a little more, this will allow you not to affect your history and avoid default interests.
● If your debts are too high and you have no choice but to pay the minimum, we recommend you refinance your debt with another cheaper loan, at a lower annual rate.
● It can be through a bank or an institution that allows you to pay off your total debt and comfortably pay an amount equal to or less than your minimum payment.
● Before resorting to this measure you should know how long it will take you to settle your debt with the minimum payments and the annual interest rate of the card.
Remember that the good management of your credit card helps you increase your credit score, which is the rating of all the credit institutions with which you have been related. This score is calculated according to the way you pay, if you are punctual or if you have reached arrears, this information is useful to your current credit institution to determine how much your credit line can increase.
Do you have a bad credit history?
It is never too late to straighten the course; Remember that your historical information changes as your payment habits do.