What is a credit limit and how are they calculated?

Key takeaways

• Credit limits are determined by the card issuer based on income, debts, credit history, existing limits, and customer relationship

• Be sure to monitor your spending and set up a direct debit to clear your debt each month

• A credit limit is a crucial aspect of credit card management, influencing financial flexibility and credit score

What is a credit limit? 

A credit limit is the maximum balance you can borrow on a credit card at any given time. It is a cap set by the credit card issuer, based on various factors unique to each individual.

This limit is set when you open your account and can be found on your monthly credit card statements, app or website.

Your credit limit isn't fixed indefinitely and can change over time. Your card provider may increase or reduce it based on factors such as how you use your account, your repayment history, changes to your financial circumstances or its own lending policies.

How is my credit limit calculated? 

Credit card issuers take into account several factors when determining your credit limit: 

• Income and financial situation: Your ability to repay is key, so issuers look at your income and other financial obligations, such as your monthly outgoings

• Existing debts: If you already have significant debt, this may affect your credit limit. The more you owe, the more the card provider could be wary of extending how much you can borrow

• Credit history: A good track record of managing credit responsibly helps

• Current credit limits: Existing limits you have on other credit cards may influence a new credit limit

• Customer relationship length: Long-standing customers may receive higher limits because they have built up trust with the provider

• The card type: Some products, such as balance transfer credit cards, come with higher credit limits to give you space to move debt, whereas specialist credit cards for those with bad credit have lower limits to reflect your higher borrowing risk

Providers periodically assess your credit card status to decide the amount of credit they will grant.

This differs from provider to provider and you do not have to accept a higher limit if you believe it might make it too tempting to overspend.

Remember, a higher credit limit should not encourage overspending but rather serve as a financial safety net. 

How card types impact credit limits

Different types of credit cards can affect the credit limit you're offered. Our table shows the average guaranteed credit limits available for different card types on the latest searches through MoneySuperMarket.

Based on the median guaranteed credit limit of users searching for credit cards to earn rewards on their spending through MoneySuperMarket in June 2026.

How to increase your credit limit

To increase your credit limit, you can:

• Contact your credit provider and request an increase

• Apply for a new card that offers a higher limit (with the caveat that you won’t know your actual limit until you have been approved)

• Maintain good credit habits, such as paying bills on time

• Avoid requesting frequent credit limit increases

• Keep your card for a longer period to show stability

• Ensure you do not miss any payments

How to reduce your credit limit

If you want to reduce your credit limit, contact your credit card provider and ask them to lower it. Many providers also let you request a lower limit through their online banking or mobile app.  
 
Reducing your credit limit can help you manage your spending and lower the risk of taking on more debt than you can afford, but it may also affect your credit utilisation ratio – the amount of available credit you are using – so consider the wider impact before making a change.

What happens if I go over my credit limit? 

Exceeding your credit limit can lead to several negative outcomes: 

• Declined transactions when you attempt to make purchases

• Fees charged by the credit card issuer for exceeding the limit

• A potential drop in your credit score

• A possible reduction in your credit limit or even account closure if overspending is a recurrent issue

How can I avoid exceeding my credit limit?

 To steer clear of going over your limit, consider the following tips: 

• Regularly monitor your credit card balance and spending

• Set up a direct debit to clear your credit card debt every month 

• Sign up for text and email alerts from your credit card issuer to keep track of your spending and balance

Should I get a higher credit limit?

There are advantages and disadvantages to having a high credit limit, as follows.

Pros: 

• Greater financial flexibility, including the ability to handle emergencies or make large purchases

• Lower credit utilisation ratio, which can positively affect your credit score

• More opportunities to earn rewards, such as points, cashback, or air miles on rewards credit cards

Cons: 

• The temptation to spend beyond your means, leading to debt 

• Increased risk of facing high-interest payments if balances are not paid in full

• Potential impact on future credit availability, as lenders may be cautious of high existing limits

What is a good credit limit?

A good credit limit depends on your lifestyle and financial situation.

If you spend large amounts, but always clear the debt every month, a higher credit limit will suit you. This could amount to several thousand pounds.

In contrast, if you’re not spending as much on your credit card and your income wouldn’t give you the ability to pay off a large balance, then a lower credit limit is likely to be preferable.

For a helpful gauge, spending 25% to 50% of your credit limit is considered favourable, as it keeps your credit utilisation low.

Kara Gammell
Personal Finance & Insurance Expert

Our expert says

“One of the first checks when you receive a new credit card should be: What’s my credit limit? Once you know this, you know how much spending power you have. But don’t view a credit limit as a spending target, think of it more of a safety net for your finances.”

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?

• What is an APR?

• Getting your first credit card

Compare credit cards with MoneySuperMarket

If you’re looking for a new credit card, then comparing options is quick and easy with MoneySuperMarket.

Just tell us a little about yourself and your finances, as well as what you want to use the new card for, and we’ll give you a list of deals tailored to your needs.

You’ll only know your credit limit once you’ve been approved, but you will be able to sort and compare deals by interest rate, any benefits or incentives, and how likely you are to get the card if you apply.

Once you’ve chosen the card you want to apply for, just click through to the provider to finalise the process.

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.