RBI in a circular issued in April imposed restrictions on American Express from onboarding new customers citing its inability to comply with its guidelines making it mandatory for all card issuers to store their Payment System Data locally in India. However, this order doesn’t affect the existing AmEx customers. That being said, a moratorium like this by the country’s central regulatory body, does upset the existing cardholders. Considering this present scenario, it becomes crucial for American Express to make some strategic moves to retain its existing customer base. At a time when most other credit card issuers are decreasing the credit limit of their customers, American Express has come up with a one of its kind offer that allows Amex cardholders to have their credit limit increased.
What is the offer?
Many American Express card members have received a mail regarding a spends-based credit limit increase offer. Under this offer, AmEx is allowing its select card members to get an over two-fold increment in their credit limit. It is an invite-only offer and only the card members who have received this mail are eligible to avail of it. If you have received such a mail, you need to enroll for the offer if you’re interested. Once you have enrolled, your credit limit will be increased within 5 business days. But in order to retain this increment, you must spend the milestone amount (as stipulated in the mail) within 90 days, otherwise, your old credit limit will be restored.
Benefits of increasing the credit limit
Before you make a decision on whether to enroll for the offer or not, it is important to know the benefits of a higher credit limit:
- The higher the credit limit, the lower the credit utilization (assuming that you spend the same amount each month). A lower credit utilization has a positive impact on your credit score. It is advisable to keep your credit utilization below 30% of your credit limit to maintain a healthy credit score (i.e. you should not be spending an amount more than 30% of your credit limit in a statement cycle).
- A higher credit limit also gets you easy approval on your future loan applications; firstly, because many financial institutions evaluate your present lines of credit before approving a loan, secondly, because, as mentioned earlier, a higher credit limit has a positive impact on your credit score, which obviously not only makes loan approvals easier but also allows you negotiate the terms in your favor.
- With an increased credit limit, you are likely to earn more reward points and cashback. This is because a higher credit limit allows you to put more of your expenses on your credit card, that you would otherwise pay for using other payment methods (or maybe another credit card).
- A higher credit limit can be really helpful in case of an emergency when you do not have enough liquid cash available at your disposal.
Given the increased risk of acquiring NPAs as a result of economic crisis due to the pandemic, no one was expecting any of the card issuers to allow a higher credit limit to their cardmembers (to the contrary, many have started cutting the credit limits). At such a time, this offer by American Express seems really lucrative. An increased credit limit, as explained earlier, has many advantages; therefore, if you think you’ll be able to cross the stipulated milestone threshold, there is no reason to not avail of this offer.