Credit Card Limits Explained
All credit cards have a credit limit, which sets the maximum amount you can borrow on the card. Find out how credit card limits are calculated and whether you can change it.
When you apply for a credit card, you will be given a credit limit. This amount is the most you can spend on your card, but you shouldn’t see it as a spending target.
Ideally you should stay well within your credit limit to avoid penalty fees and to minimise the impact spending close to your limit could have on your credit score.
Read on to find out how credit limits are set, why they’re so important, and how you can increase your credit card limit.
What is a credit card limit?
Your credit limit is the amount you have been authorised to spend on your credit card. It is set by your lender and dictates how much debt you can build up.
For example, if you have a £2,000 credit card limit and your balance is £1,500, you would only be able to put another £500 on your card (until you repay some of your balance).
You can find out your credit limit by checking your credit card statement or online account (if applicable).
It’s important not to confuse your credit card limit with available credit – the amount you have left to spend on your card. So, in the example above, your available credit would be £500.
When you make payments towards your balance, you increase your available credit. Continuing the above example, this means if you made a payment of £400, your balance would go down to £1,100. So, with a £2,000 credit limit, your available credit would increase to £900.
» MORE: How do credit cards work?
What credit limit could I get?
Credit card companies will set your credit limit based on the information you give in your application and your credit score. It is a personalised amount, so you may get a different credit limit to the one advertised.
During your credit card application, providers will run a credit check and ask for other details, such as your income. This is not only to decide whether to approve your application, but also to decide what terms they will offer if you are approved.
For example, your income, current debts and available credit, as well as your credit history can affect what credit limit you receive. The length of time you’ve been with a provider could also influence your credit limit.
Depending on your individual situation, you could get a credit limit of a few hundred pounds or several thousand pounds.
If you have a poor credit history, you might get a lower credit limit as the provider may view you as a higher risk. Therefore, they will limit the amount you can borrow, at least until you prove you can manage your card effectively.
Credit builder cards and specialist credit cards for people with bad credit will typically offer lower credit limits.
If you have a better credit score, you might qualify for higher credit limits as the lender would have more confidence that you will repay your balance.
What happens if I go over my credit card limit?
In many cases, you won’t be able to go over your credit card limit as your credit card will be declined if you try to spend more than the remaining balance. However, sometimes these transactions go through, which will put you over your credit limit.
If you do go over your credit limit, you will usually be charged a penalty fee.
At that point, your card provider may also lower your credit limit, ask you to repay the total amount you owe, close your account or remove any promotional interest rates you may have. Going over your limit can also affect your credit score.
If you think you’re in danger of going over your credit limit, contact your provider as soon as possible.
Does your credit limit affect your credit score?
Your credit card limit can affect your credit score in several ways:
- How much available credit you have. Your credit limit appears in your credit report, along with your outstanding credit card balance. The difference between the two is your available credit. Lenders will be able to see how much available credit you have if you apply for credit in the future.
Using too much of your available credit and going too close to your credit limit too frequently could affect your credit score. Using a small proportion of your credit limit indicates to lenders that you can manage your credit responsibly, and it’s generally recommended that you try to use less than 30% of your available credit at a time. However, trying to reduce the percentage of credit you’re using shouldn’t be a reason to increase your limit.
- Going over your limit. Getting close to or exceeding your credit limit could suggest you are having financial problems and could affect your credit score.
- Leaving a mark. Most providers will check your credit report when you request a credit limit increase, which can leave a mark on your credit history. Too many credit searches could damage your credit score, so be aware of this if you want to increase your limit.
Can I change my credit limit?
You may be able to change your credit limit on your credit card, but this will depend on the provider and your individual circumstances.
If you’ve just applied for a card and you want a higher credit limit, you should wait before asking for an increase as the provider is unlikely to agree to raise it immediately. Some providers may set a minimum number of months before they will consider a credit limit increase.
If, after several months, you can prove that you can manage your card, the provider may be more willing to increase your limit.
Some credit card providers may offer to increase your credit card limit automatically, without you having to request it. However, you don’t need to accept this if you don’t want a higher credit limit, or you may be able to request a smaller increase.
You can also ask to change your credit limit by contacting your card provider.
When assessing whether to increase your limit, your lender will look at your credit score, how you have used your credit card and whether you have paid your bills on time.
Your credit limit can go down as well as up. For example, your card provider may reduce your credit limit if you’ve missed payments or it thinks you may struggle to repay your balance. You would be notified if this is the case.
Should I increase my credit limit?
Ultimately, this decision is up to you. For example, if you need to make a large purchase that costs more than your current credit limit, you may consider applying for a higher limit.
However, you should only increase your credit limit if you can afford to do so and, ideally, if you can pay off your balance before you start being charged interest.
A higher credit limit can give you more flexibility, but it could also encourage you to overspend.
The more you spend, the more interest you could face, which could make it more difficult for you to pay off your credit card balance. As a result, it may be better for some people to keep their credit limit as it is.
And if you’re worried about overspending, you could ask your provider to reduce your credit limit.
Bear in mind that most providers will require you to wait at least several months after changing your credit limit before considering another change.
If you want to increase your credit limit because you are struggling with your finances and want to borrow more money to cover your expenses, it is unlikely to be a good idea. A higher credit limit means you could take on more debt, which you may find difficult to pay off.
If you’re experiencing financial difficulties, instead of applying for a higher credit limit, it would be better to contact your provider and ask for free help and advice from a debt charity.
» MORE: Where to get debt help
Ruth is a freelance journalist with 15 years of experience writing for national newspapers, magazines and websites. Specialising in savings, investments, pensions and property. Read more
Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more