Question 1

What's a credit limit?

Accepted Answer

Your credit limit is the maximum amount of money you may charge to one credit card account before paying down your credit card balance. If a transaction goes over your credit card limit, the credit card issuer may decline it, or you may have to pay a fee.

Question 2

What's the best way to get a high credit card limit?

Accepted Answer

Each issuer has its own criteria for determining credit card limits and may weigh individual components of your credit profile differently. The best way to get a good limit is by making sure all the factors that affect your credit score are in good standing.

Question 3

How is a credit card limit determined?

Accepted Answer

Credit card companies set credit card limits by estimating how much additional credit you may manage and reliably repay. Your credit score plays an important role in determining your credit card limit. If you have a good credit score, card issuers may be more likely to conclude that you can manage a higher credit limit. A good credit score alone, however, doesn't necessarily guarantee a high credit limit.

Question 4

Does a high-limit credit card affect your credit score?

Accepted Answer

If you already have credit card debt, then a high-limit credit card may improve your credit score by decreasing your credit utilization ratio. For example, if you have two credit cards with a total credit limit of $5,000, and your balance is $2,500, your credit utilization ratio is 50%. But if you were to open a new credit line that increases your total available credit to $25,000, your credit utilization rate for the same balance would be 10%. So, having high-limit cards may let you run a larger balance without your credit utilization ratio affecting your credit score, as long as you keep your credit utilization rate low.

Question 5

What happens if you go over your credit limit?

Accepted Answer

Depending on the terms of your cardmember agreement, your credit card issuer may charge you a fee for going over your limit, or the transaction may be declined.

Question 6

Can you raise the credit limit on your credit card?

Accepted Answer

If you have a lower credit limit than you'd like, don't fret. Issuers may periodically review your credit account to determine whether you qualify for a credit line increase. And if you've used a card for a while without any missed payments or other negative activity, you may request a credit limit increase yourself. The card issuer determines your eligibility based on your current financial situation.

Question 7

Can your credit limit be reduced after it's determined?

Accepted Answer

You might think that a high credit limit won't decrease once you have it. But achieving a high credit limit doesn't mean you can ignore the factors that determine your credit limit. Card issuers periodically review your credit score. If you're consistently using a large percentage of your credit limit, your score may be affected, which FICO explains, may lead to a lower limit.

Question 8

Should you ask for a credit limit increase or apply for a new credit card if you need more credit?

Accepted Answer

Applying for a new credit card and requesting a credit line increase may both result in a hard credit inquiry, which may bring down your credit score a few points. Your individual credit history and needs may determine whether it's best to request a limit increase on an existing credit card or apply for a new card. If you primarily want a little more room to spend, then a credit limit increase may be the right fit. But if you want to access different features or earn more rewards, you may want to apply for a new card.

What is a Credit Card Limit?

Key Takeaways

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