When we talk about credit limits, we are talking about control, restrictions, and freedom at the same time, as it is the thin line that separates what we can buy from what we cannot reach, between the dreams that we can achieve and the limits that we must adhere to. Just as the stars exceed the limits of the sky and extend into infinity, financial ideas go beyond the limits of the credit limit and expand into a horizon of countless possibilities. Imagine for a moment that there are no limits, no upper limit to the purchases that we can make, and what would happen if they were achieved? It can be a harsh restriction on our ambitions, but at the same time, it can be a blessing in disguise. It teaches us financial discipline and control of spending.
What is the meaning of the term credit limit?
It is an agreement or arrangement between a financial institution and its client to determine the maximum amount of debt allowed for the client. This limit is determined based on several factors, such as:
- Credit date.
- Credit record.
- Payment date, income, and others.
The credit limit aims to determine the extent to which a customer can borrow, so that he can manage his debts responsibly and without exposing himself to financial problems. When the client reaches this point, he is not allowed to exceed this limit or use more debt. Until he pays part or all of the debt owed to him in accordance with the concluded agreement.
Example
If the credit limit agreed upon between the customer and the financial institution is 5,000 riyals, then when the customer reaches this limit, he will not be able to use more credit until he pays part or all of the amount due.
How is the credit limit for a credit card determined?
Determining the credit limit for a credit card is based on several factors, including: information about the credit card itself, the approved limit of credit, the customer’s income, and periods of credit use; So let’s review these factors in more detail:
Credit card information
Credit card information includes: the financial condition, the customer’s credit history, and it is worth noting that the customer’s previous credit history is evaluated, including: the completeness of payment, outstanding debts, and late payment.
Credit history is an important indicator of a financial institution’s ability to repay future debt.
Approved limit of credit
The approved limit of credit is determined based on the analysis of the customer’s financial and credit data, and this is based on the monthly income, source of income, average spending, etc., and other obligations of the customer.
It is worth noting that the approved limit of credit aims to ensure that the customer is able to repay the debt without exposing himself to major financial problems.
Customer income
The customer’s income is an important factor in determining the credit limit, as the customer’s ability to repay the debt is evaluated based on his monthly income and stable source of income. In general, financial institutions prefer that the customer have a fixed and stable income. To ensure timely payment of debt.
Credit usage periods
Credit usage periods are also taken into consideration when determining the credit limit. This means the frequency and frequency of using the credit card and paying the amounts owed. If the customer uses the card regularly and pays off the debt on time, his credit limits may increase.
How do I raise the credit card limit?
To obtain and maintain a high credit card limit, you can follow some of the following instructions:
Build a good credit history.
Before getting a credit card with a high limit, you must have a strong credit history. You can start by opening small credit accounts and paying installments on time in order to prove your ability to manage debts well.
Be careful not to open too many accounts at once.
Opening multiple credit accounts at one time may negatively impact your credit rating. Therefore, it is preferable to start by opening only one or two accounts and prove your competence in money management before considering opening more.
Proof of your income
If your income is high, you can provide the necessary documentation to the credit card issuer to prove your ability to repay debts on a regular basis, and you may need to provide salary statements, a tax declaration, or other documents to show your income.
Pay the credit card balance in full.
It is best to aim to pay the credit card balance in full at the end of each month. This helps build a good credit history and shows that you are managing your debts responsibly. If you cannot pay the balance in full, try to at least pay the minimum required.
How do I lower my credit limit?
If you want to avoid hitting your credit limit quickly, here are some tips that can help you with that:
Monitor daily consumption and spending.
You should be careful when using a credit card, avoid spending excessive amounts, and try to keep the consumption percentage (credit limit utilization ratio) low, for example, less than 30% of the total limit. It is also recommended to monitor daily spending and make sure not to spend excessively.
Set up special alerts.
You can set up alerts on email or your mobile phone. To remind you if you are approaching the permissible credit limit, you can set these alerts to reach you when the credit limit utilization percentage reaches a specific percentage, such as 70% or 80%. These alerts will help you monitor your card usage and avoid reaching the limit.
Use the automatic payment feature.
Most banks and financial institutions offer an automatic credit card payment feature. Therefore, you can activate this feature so that the institution automatically withdraws the amount due on the card from your bank account on the due date. This ensures that you pay the installments on time, avoiding accumulating debt or delaying payment.
How to activate the credit limit in the account
When it comes to activating the credit limit in the Qoyod accounting software system, there are several steps that can be followed, but you must activate the additional fields and then start adding (this is illustrative information and does not result in closing the addition of an invoice to the customer due to the credit limit that was set).
Steps to activate the credit limit in Qoyod:
- Open the Qoyod accounting software system and go to the main menu.
- Click on “Customers” from the main menu to access the customer page.
- After arriving at the Customers page, find the customer whose account you want to activate the credit limit for.
- Select the customer by clicking on their name or choosing them from the drop-down list.
- Once you select the customer, you will be presented with customer settings options. Then look for the “General” card under the Additional fields section.
- On this card, you will find a checkbox next to “Credit Limit.”.
- Click this box to activate, and set the credit limit as needed.
- After activating the credit limit, save the changes you made in the customer settings.
How to add a credit limit to the customer file
Adding the credit limit to the customer’s file is a process that allows you to determine the maximum amount that the customer can use as a debt or loan from the company or institution that manages the system. Adjusting this helps ensure that the customer will not exceed the specified amount, contributes to risk management, and achieves a balance between… To give confidence to the customer, protect the company’s interests, and add a credit limit to the customer’s file, you can follow the following steps:
- Access the customer management system, or the software used to manage customer files.
- Select the customer you want to add the credit limit to from the list, or use the search feature to find the correct file.
- Look for a section or page labeled “Credit Limit” or something similar, perhaps categorized under General Customer Settings.
- When you find the appropriate field, enter the amount you would like to set as the customer’s credit limit.
- There may be an option to specify the currency or time period required for the credit limit, as per company policy.
- Save your changes to the customer file.
Conclusion
We realize that the credit limit is not just a specific number that limits our financial capabilities, but rather a challenge that we must challenge and exploit to our advantage, as it is an opportunity for creative thinking and financial innovation, in addition to being an opportunity to discover our true potential and achieve endless successes, when we master the art of exceeding the limits imposed on us. ; We learn how to control spending, plan wisely to achieve our financial goals, and then finally realize that it is not a prison that imprisons us but rather a reference that guides us and teaches us financial discipline. So we came up with this article, through which we learned how to exploit the credit limit to our advantage and how to overcome the restrictions imposed on us to reach the highest financial levels. Do not forget that this type of limit is only a door to challenge and excellence. So let us step with confidence and faith towards a bright and prosperous financial future.
Do not let the credit limit be a ceiling that limits the achievement of your dreams, but rather let it be a challenge that you overcome and through which you achieve your endless successes. It is worth noting that the program also offers all its clients: electronic invoice systems as well as point-of-sale systems, stores, customers, etc., which makes it the best accounting software you will ever find.
After knowing what a credit limit is and how it is determined for a credit card, try Qoyod now for free for 14 days.
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