Setting Your Own Credit Card Limit

Sometimes pushing limits can help you reach your goals. Other times limits create necessary boundaries that help you successfully navigate life. For example, staying within the boundaries of a budget can safeguard your financial health and growth. This includes the way you use your credit card. You can apply your personal spending goals to the amount you allow yourself to charge on your card, helping you responsibly manage your credit based on what you decide you can comfortably afford. Our guide to setting credit card limits explains just how to get started.

What is a credit card limit?

When you get a credit card, the issuer gives you a credit limit—the total amount of money you’re allowed to spend on your credit card. For example, if your credit card limit is $1,000, you can spend up to $1,000 on purchases (you don’t have to spend it all at once) before you run out of credit on your card. You’ll have to pay back some or all of your credit (plus any interest you’ve accrued) to free up your credit and continue using the card.

Your credit card issuer sets a credit card limit (or credit line) based on what they think you’ll be able to pay back. Sometimes, as your credit history changes, the credit card issuer may increase or decrease your credit limit to match the amount of risk they think you present as a borrower.

Even though your credit card company sets a credit limit for you, that doesn’t mean charging that amount is in your best interest. You might feel your credit line gives you too much spending flexibility and worry that you’ll struggle to pay it off should you spend up to the limit. If that’s the case, you can decide on a personal credit card limit (or personal spending limit) to help keep you within your budget. And because this spending limit is personal, it’s something you determine based on your unique financial situation.

What impacts your credit card limit?

Several factors can impact your credit card limit, including your credit score, credit balances, and income.

You’re likely to get approved for a higher credit limit if you have a higher credit score (the three-digit number that grades your credit report) because lenders may see you as a lower-risk borrower.

The balances you carry on your credit cards may also be a factor credit card companies consider when determining your credit limit. Maintaining a balance on your card contributes to the overall amount of credit you use. (The total amount of credit you use, called your credit utilization ratio, accounts for 30% of your credit score.) Lenders who see a large portion of your credit in use may be hesitant to extend more. On the flip side, credit issuers may think you can manage additional credit if your credit usage is low. The Consumer Financial Protection Bureau recommends keeping the amount of credit you use below 30% of your total available credit.

Your income is another important factor that lenders will consider when determining your credit limit. If you have a higher income, you have a better chance of being approved for a higher credit limit, as lenders may believe you can more easily repay your debt. 

How to manage your spending with a personal credit card limit

Once you safeguard your personal credit limit, you can use these smart strategies to stay on track.

• Create and follow a budget: Rather than spending haphazardly, a budget helps you create a plan for how you want to spend your hard-earned dollars. If you don’t already have a budget, there are a variety of budgeting apps that can help you build one. 

• Manage your credit card account using a mobile app: Many credit card companies have a mobile app you can download and use to keep an eye on your account. You can check your balance, review transactions, make payments, view credit card statements, and more. Regularly monitoring your account can offer awareness that helps you successfully navigate your borrowing.

• Use a mobile app to learn more about your spending: Some apps will sort your credit card purchases into categories, such as groceries, restaurants, and entertainment. You’ll know exactly where your money goes and can adjust your spending as needed.

Why set a personal credit card limit?

Rather than spending until you reach your credit card limit, setting a personal limit can help you establish realistic and responsible spending habits, not to mention the potential to save on interest. And by keeping your credit utilization low, you can grow your savings, build credit, and secure future investments.