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What is a Credit Card Limit?

Last Updated: January 27, 2023
4 min read

Key points about: credit card limits

  1. Your credit card company determines your credit limit, which is the maximum amount you can spend on your credit card.

  2. A higher credit limit makes it easier to keep your credit utilization ratio low, thus positively impacting your credit score.

  3. Several factors affect your credit limit, including your credit report and your personal income-to-rent ratio.

What is a credit limit?

Your credit card limit is the maximum amount of money you can charge to your credit card. Once you learn how credit limits are determined, you can increase your chances of qualifying for a higher credit limit.

How is a credit card limit determined?

Did you know?

Credit card limits reflect how much money the credit card company thinks cardmembers can borrow and manage responsibly. Your credit score is an important factor in determining your credit card limit, but a high score alone does not necessarily guarantee a high credit limit. To determine credit limits, credit card issuers typically look at your credit history, your income, and how much you pay for your rent or mortgage.

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

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

Factors that help determine your credit card limit

Credit report

Your credit report is very important when it comes to determining your credit limit, and it includes:

Payment history: Your payment history—which can account for a significant percentage in credit scoring models—is a measure of your creditworthiness. The idea is, if a cardholder has paid their bills on time in the past, they’re more likely to do so in the future. Ensuring you always make your credit card payments on time is one of the best long-term paths to a higher credit limit.

Credit utilization: Credit utilization refers to the amount of a person’s credit in use compared to their total credit available. A lower credit utilization—less relative credit in use—will generally be better for card approval and credit limit determination.

Credit card issuers may look at both overall credit utilization and utilization on individual lines of credit when determining the size of a credit card limit on a new account. If you plan on applying for a new card in a few months, paying down some existing balances could help raise your credit limit.

Length of credit history: Having a longer credit history gives issuers a larger pool of data to predict how you’re going to use credit moving forward, and a long history of responsible credit use will generally help improve your odds of a higher credit limit.

Recent inquiries: A person who’s applied for a handful of credit cards—or other lines of credit—in a short period of time may be viewed as a risk by issuers and could therefore receive a lower credit card limit. When you apply for a credit card, your credit receives a “hard inquiry,” and too many of those in a short period of time will likely impact your credit score.

Personal income and monthly expenses

Your income and housing costs may help determine your credit limit. If an applicant has a high income with a relatively low rent or mortgage, odds are they have more discretionary income and thus may qualify for a higher spending limit, depending on other factors.

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

Although a high-limit credit card doesn’t affect your credit score by itself, having a high total limit makes it easier to lower 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 add high-limit cards that increase your total available credit to $25,000, your credit utilization rate for the same balance would be 10%. This means that having high-limit cards lets you run a larger balance without your credit utilization ratio affecting your credit score.

What happens if you go over your credit limit?

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.

Can you raise the credit limit on your credit card?

If you don’t receive your ideal credit limit right after applying for a card, don’t fret. Many issuers have been known to increase credit limits on their own over time. And if you’ve used a card for a while without any missed payments or other negative activity, you can request a credit limit increase yourself.

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

You might think that a high credit limit won’t go down once you have it. But having a high credit limit doesn’t mean you can ignore the factors that determine your credit limit. Card issuers periodically review your credit score, and if you’re consistently using a large percentage of your high credit limit, your score may be affected, which may lead to a lower credit limit.

Is it better to ask for a credit limit increase or apply for a new credit card?

Whether applying for a new credit card or requesting a line increase, these actions may impact your credit score, but increasing the limit on an existing card will usually have a lesser effect. However, if your credit score is already high, it might be worth applying for a new card to get rewards that are only offered to new cardholders. For example, Discover Cards offer Cashback Match to new cardmembers, which means that Discover will automatically match all the cash back you’ve earned in your first year.1

Your individual credit history will determine whether it’s best to request a limit increase on an existing credit card or apply for a new card.

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