Credit Limit Explained
Knowing your credit limit can save you from expensive mistakes when it comes to credit card spending
What is a credit limit?
A credit limit is the maximum balance you can borrow on a credit card at any given time.
Credit limits are unique to individuals and their personal credit card accounts and are usually set by the lender.
Your credit limit should be stated in correspondence you receive from your credit card provider, who will let you know if it is going to change.
How is my credit limit calculated?
When determining your credit limit, credit card issuers consider several factors:
Income and financial situation: Lenders evaluate your income, including your disposable income after expenses, to gauge your ability to repay credit card debt.
Existing debts: The amount you already owe, such as mortgage payments, loans, and other credit card balances, is taken into account to assess your overall debt burden.
Credit history: Lenders review your credit history, including your credit score and repayment behaviour, to help evaluate how much they are willing to lend you.
Current credit limits. Card issuers assess how much credit you already have available before allowing you to take on more debt
Length of customer relationship: If you have a long-standing relationship with a credit card issuer, they may be more inclined to offer a higher credit limit as they have more familiarity with your financial habits.
It's important to note that credit card issuers may also use the information in your credit report to determine your credit limit. Therefore, maintaining a good credit score by following our tips to improve your credit rating is beneficial before applying for a new credit card.
How do I increase my credit limit?
If you're looking to increase your credit limit, consider the following steps:
Contact your credit card provider: Reach out to your credit card issuer to ask about a credit limit increase. Most credit cards provide a customer service number on the back of the card that you can call. The issuer will review your request and make a decision accordingly.
Apply for a new credit card: Another option is to apply for a new credit card. Keep in mind that managing multiple credit cards requires careful budgeting and responsible credit usage.
Maintain good credit habits: To improve your chances of a credit limit increase, continue to use the card responsibly. This includes making payments on time, keeping your credit utilisation ratio – the percentage of available credit you’re using – low, and avoiding excessive spending close to your credit limit.
Avoid frequent requests. Requesting credit limit increases too frequently can have a negative impact on your credit score. It's advisable to wait a reasonable amount of time between requests.
Keep your card for a while: Having your credit card for a long period can be looked on favourably. By keeping the same card for a while it can boost your chances of being accepted for a credit limit increase.
Don’t miss payments: Missing payments will negatively impact your credit score. Always make sure to keep up with your monthly card payments.
How do I find out what my credit limit is?
You’ll be told your credit limit when you open your credit card account and receive your card. You can also check by looking at your most recent statement. If you manage your credit card digitally – on your mobile phone or online – you’ll also be able to see the limit when you log in.
What happens if I go over my credit limit?
It’s best to avoid going over your credit limit. But if you do exceed it you could:
Be declined a purchase and stopped from spending more on your credit card until you have paid off some of the balance
Incur a fee for breaking your agreed credit limit
Your credit rating could be negatively affected
If you keep on overspending your lender could lower your credit limit, meaning you’ll be able to borrow less in future. They could also ask you to pay back the full amount or close the account.
How do I avoid going over my credit limit?
Knowing your credit limit and keeping tabs on your spending habits will help you stay within your limit. Other tips include:
Direct debit: You can set up a direct debit to clear your credit card debt every month
Text and email alerts: You can sign up for alerts that will notify you if you’re approaching your credit limit
What is seen as a good credit limit?
A good credit limit for you will depend on your individual circumstances and needs. For most credit card holders this typically means a credit limit where they will only need to access around 25% to 50% of that limit at any given time.
Having a lower credit utilisation – the percentage of available credit (or the percentage of your credit limit) that you use – can have a positive impact on your credit rating. Conversely, spending up to your credit limit every month suggests your finances are stretched and this could harm your credit score over time.
A lower credit limit could be best for you if it helps with your monthly budgeting and reduces the temptation to overspend.
A large credit limit can be useful in certain circumstances. For example, if you needed to buy an expensive purchase quickly, such as a car for work. A large credit limit on a 0% interest purchase card could be useful, giving you several months at zero percent interest to pay off the amount borrowed.
What are the pros and cons of a high credit limit?
There are several advantages and disadvantages to having a high credit limit. These include:
Advantages:
Allows you more flexibility with your finances, including money for emergencies
Enables you to make bigger one-off purchases and then pay them off over several months, ideally with a 0% deal
Your credit utilisation can be kept lower provided you only spend a small percentage of your credit limit
Because you can spend more you can accrue more points, cashback or air miles on specialist rewards credit cards
Disadvantages:
There could be greater temptation to spend beyond your means and get into debt
You run the risk of being hit with higher interest payments if you only pay the minimum monthly payment on your card and don’t pay off the balance in full every month
It increases the credit available to you which may put other lenders off agreeing to lend to you in future
Other useful guides
We have lots of useful guides to help you with your next credit card decision:
What is a credit card minimum payment?
Getting your first credit card
Compare credit cards with MoneySuperMarket
Finding the right credit card is straightforward with MoneySuperMarket. Tell us a little about yourself, your financial circumstances and what you need from a credit card and we’ll look across the market to find credit card offers which we think will suit you best.
You'll be shown a range of credit cards, which you'll be able to sort according to APR, card features, such as rewards or cashback, and your chances of being approved.
Different providers handle initial credit limits in different ways. Some will ask you to choose an initial credit limit up to a certain amount – although this will still have to be approved. Others will simply tell you your credit limit when the application has been approved.
MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.