Updated: October 23, 2024
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When you get a credit card or line of credit, the issuer sets a predetermined limit you may borrow, referred to as your credit limit.
Lenders rely on different factors to determine borrowers’ credit limits, including their credit scores, income and existing debt. Borrowing over this limit may lead to declined transactions as well as other repercussions.
Credit limit refers to the maximum amount you may spend using a credit card or a line of credit.
Lenders consider aspects such as your creditworthiness and income before assigning credit limits.
Credit limits may increase or decrease over time based on different factors.
A credit limit is the maximum amount you may spend using a credit card or a line of credit. Any amount you spend from this limit changes your available credit.
Cardholders may receive different credit limits for the same credit card based on individual factors. For instance, if you’ve just started building your credit history, you may expect to get a relatively low credit limit. If your credit score is relatively high, you’re likely to receive a higher limit.
Keep in mind that knowing your maximum credit limit doesn’t imply that you should use it entirely. It’s crucial to utilize your spending effectively so it can positively impact your creditworthiness.
If you don’t know the credit limit of any of your credit cards or lines of credit, you can usually find it on your statements or through your lender’s online platform. Calling your credit card company’s customer care number is also an option.
Good credit limits vary based on different factors. For instance, what might constitute a good credit limit for someone with fair/average credit might seem insufficient for someone with excellent credit. Besides, if you’re new to credit and are looking for your first credit card, you may expect a credit limit as low as $200.
According to numbers released by Experian based on consumer credit data from the second quarter of 2019, the average credit limit of those between 18 and 22 years of age was $8,062. For those aged 23–38, it increased to $20,647. Baby boomers (55–73 years old) accounted for the highest average credit limit at $39,919. The overall average credit limit for consumer credit cards changed from $31,371 in 2019 to $30,365 a year later.
Data released by Equifax shows that the average credit limit for all private label cards issued during June 2021 was $2,166.
If you have a credit card with a $1,000 credit limit and you’ve used it to spend $300, your available credit drops to $700. If, at this stage, you make a $100 payment toward your credit card bill, your available credit increases to $800. However, your overall credit limit remains the same at $1,000. While your credit limit stays the same at most times, it is subject to change under certain scenarios.
How much of your available credit you use has a direct bearing on your credit utilization ratio, which, in turn, affects your credit score. Your credit utilization ratio is the percentage of total available credit you’ve used — ideally, it should be 30% or lower.
As an example of how to calculate credit utilization ratio: If all your credit limits added together total $4,000 and you’ve spent $3,000 of it, your credit utilization ratio is 75%. To get it to 30%, you’d need to bring down your outstanding balances to $1,200.
Lenders consider different factors when assigning credit limits. For instance, someone as old as you and who earns the same income might qualify for a different credit card limit than you based on individual factors, like creditworthiness, payment history, income, required minimum payments and credit utilization ratio.
Creditworthiness
Your credit score gives lenders an indication of how well you’ve managed your credit so far. People with good to excellent credit scores stand a better chance to qualify for credit cards with high limits than those with average creditworthiness. In addition, older people with longer, well-maintained credit histories typically get higher credit limits than younger people.
Payment history
This demonstrates how consistently you pay your bills on time.
Income and expenses
Your income and expenses indicate how much credit you might be able to pay off comfortably. For instance, if you have a sizable portion of your income left after accounting for your regular expenses, you may expect a lender to view your application favorably.
Credit utilization
Lenders are wary of offering high credit limits to people with high credit utilization ratios. Keeping your credit utilization ratio to 30% or lower is one of the best ways to qualify for a higher credit limit.
If you’re looking for a high credit limit on your first credit card, consider getting a secured card by providing a large security deposit. Alternatively, work on building your credit so you can qualify for a higher limit in the future. In either case, MoneyGeek can make it easier to find the best card for you with our reviews of over 1,600 consumer credit cards.
It is common for credit card issuers to review how cardholders use their cards and then change their credit limits accordingly. Cardholders may also request issuers to increase or decrease their credit limits. A change in your credit limit may affect your credit utilization ratio. For instance, increasing your credit limit can help bring down your credit utilization ratio.
The CARD Act of 2009 requires that you provide consent for over-limit protection, in which case your card provider may charge over-limit fees. If you don’t opt in for this feature, you can expect declined transactions when you go over your credit limit. If you opt for over-limit protection, your card provider will charge a fee each time you exceed your credit limit. This fee cannot be more than the amount that you’ve charged over the credit limit. For example, if you’ve exceeded your credit limit by $5, the over-limit fee will be no more than $5.
There might be other consequences of breaching your credit limit, which include:
You generally don’t have to worry about over-limit fees with charge cards, given that they typically come with no preset spending limits (NPSLs). However, since these cards also rely on limits in some form, you might face declined transactions when making very high-value purchases.
Maintaining a positive payment history is the number one factor in your credit score. Set up automatic payment of the minimum amount due so that you'll avoid late fees and negative marks on your credit report. -- Lee Huffman, credit card expert at BaldThoughts.com
Find answers to other commonly asked questions about how credit card limits work and how you can use them to your benefit.
You should ideally use no more than 30% of your credit limit. And the more that you can reduce your utilization below that level, the better off your score will be. When your balances are above 30%, it may adversely affect your credit utilization ratio and credit score.
Yes, because doing so lowers your available credit and increases your utilization. This can lower your credit score. Ideally, you should limit your borrowing to 30% of your total available credit.
Using all your available credit will result in a 100% credit utilization ratio, which is bad for your creditworthiness. While this would hamper your chances of getting credit in the future, it can also lead to higher-than-average interest rates. When it comes to how much of your available credit you may use, we recommend limiting it to 30% or lower.
According to data released by Equifax, the average credit limit for all private label cards issued in June 2021 stood at $2,166. With new subprime cards, it dropped to $829. If you’re taking out your first credit card, you can expect your average credit limit to be closer to the subprime average — however, keep in mind that your credit limit may be even lower than this figure.
With a credit limit of $500, you should spend no more than $150 to keep your credit utilization ratio below the ideal 30% mark. If you need to use your card more than this throughout the month, it is OK to make extra payments throughout the month to keep your balance lower.
Any credit limit over $5,000 is considered high.
Credit limits do not change each month. Your credit limit might increase or decrease based on different factors, but this does not happen often.
Lenders look at your income to determine your debt-to-income ratio (DTI), which measures your earnings against your existing debt-related obligations. The lower your DTI, the higher a credit limit you might stand to get. Keep in mind that other factors such as your credit score, length of credit history and how you utilize your credit might also affect your credit limit.
Now that you know the meaning of credit limits and how they can affect your credit score, be sure to compare credit limits for multiple cards to find the best option for you. Once you get your new card, refrain from spending more than 30% of the total credit limit and make your payments on time to improve your creditworthiness over time.
MoneyGeek experts use different sources — including data from the Bureau of Labor Statistics (BLS) — to analyze spending trends. We remain up to date on the latest credit card offers and changes in fees/APRs of over 1,600 credit cards to help you find the best option for you.
If you have any credit card or credit-related questions — be it about your rights as a cardholder or how credit scores work — you can trust the MoneyGeek editorial team to guide you in the right direction. Team members keep up with the latest trends, offers and changes in regulations so they may answer your questions quickly.
About Doug Milnes, CFA
Doug Milnes is a CFA charter holder with over 10 years of experience in corporate finance and the Head of Credit Cards at MoneyGeek. Formerly, he performed valuations for Duff and Phelps and financial planning and analysis for various companies. His analysis has been cited by U.S. News and World Report, The Hill, the Los Angeles Times, The New York Times and many other outlets.
Milnes holds a master’s degree in data science from Northwestern University. He geeks out on helping people feel on top of their credit card use, from managing debt to optimizing rewards.
