1. What is Credit Card Limit Calculation?

The credit card limit calculation estimates the maximum amount a bank may offer based on your annual income and their risk assessment factors. This helps determine your purchasing power and credit utilization ratio.

2. How Does the Calculator Work?

The calculator uses the credit limit formula:

Where:

• \( Income \) — Your annual income
• \( Factor \) — Bank's risk assessment multiplier (typically 0.1-0.5)

Explanation: Banks multiply your income by a factor (usually 10-50%) based on your creditworthiness to determine your credit limit.

3. Importance of Credit Limit Calculation

Details: Knowing your potential credit limit helps in financial planning, maintaining good credit utilization ratios, and understanding your borrowing capacity.

4. Using the Calculator

Tips: Enter your accurate annual income and the credit factor (default is 0.2 or 20%). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical credit factor?
A: Most banks use factors between 0.1 (10%) and 0.5 (50%), with 0.2 (20%) being common for average credit profiles.

Q2: Why do credit limits vary between banks?
A: Different banks have different risk appetites and may assign different factors based on their assessment of your creditworthiness.

Q3: Can I request a higher limit?
A: Yes, after establishing good payment history, you can request limit increases or the bank may automatically increase it.

Q4: Does this calculation apply to all card types?
A: Premium cards may have higher factors, while secured cards may have lower factors based on your deposit.

Q5: How often should I check my credit limit?
A: Review your credit limit periodically, especially after income changes or when planning major purchases.