How Your Credit Card Limit Is Determined

When you’re approved for a new credit card, the issuer will determine a credit limit for your account. Many issuers use information from your credit report to calculate this limit, while others have preset limits that are issued to all new cardholders.

People with better credit scores and incomes are likely to get higher credit limits since they are viewed as less of a potential credit risk. After all, a high credit score is correlated with a history of on-time payments and the ability to pay off your debts.

Want to know more? Here’s how credit limits work, how credit card issuers calculate credit limits and what you can do to increase your credit card limit quickly.

What is a credit card limit?

A credit card limit is the total amount of money you can charge to a credit card. If your credit card has a limit of $5,000, for example, it means you can carry a balance of up to $5,000 on your credit card. Your credit card limit includes both new purchases and balance transfers, as well as any other transactions that draw against your line of credit, such as cash advances. Even your annual fee is charged against your total credit limit.

The average credit card limit, according to 2024 data from Experian, is roughly $33,980 per American. This number represents the total credit Americans can access across all of their credit card accounts, not their per-card limit. In general, credit limits tend to run between $500 and $10,000 per card. However, many credit cards for bad credit offer lower credit limits in exchange for the opportunity to rebuild your credit score.

How is your credit limit determined?

Your credit limit is calculated in one of three ways. In some cases, you’re offered a predetermined credit limit. In other cases, your credit limit is influenced by your credit history and credit score. In a few situations, a credit card issuer will conduct a more detailed analysis of your credit history, considering any reasons why you might be a potential credit risk and evaluating the credit limits you currently have on your other cards.

• The credit-based limit
  

  Many credit card companies turn to your credit score to help determine your card’s limit. This means that factors such as payment history, credit utilization, length of credit history, credit mix and recent inquiries will impact your new card limit. Issuers will likely also consider things like your household income, employment and monthly expenses.

• The predetermined credit limit
  

  Some credit card issuers offer credit cards with predetermined credit limits. A starter credit card might have a $500 limit, while a premium credit card could have a $5,000 limit.

  “It’s not a highly personalized decision,” says Eric Lindeen, former senior marketing consultant at CRM Northwest Inc.

  What happens if you aren’t satisfied with your credit card’s predetermined credit limit? Lindeen suggests asking the card issuer to raise the limit. “Some issuers allow some wiggle room but don’t expect an increase of more than 10 percent to 20 percent,” he explains.

• The customized credit limit
  

  Some credit card issuers utilize various factors to establish a customized credit limit for each new applicant. This enables the credit issuers to reduce risk when granting new lines of credit.

  According to Lindeen, some issuers create a grid system and compare several different types of scores, such as a credit score and bankruptcy score, to figure out a credit limit. Others consider your income or debt-to-income ratio when generating a credit limit.

  “Some issuers may even take into account the limits on your other credit cards, which can be found on your credit reports,” says John Ulzheimer, a nationally recognized credit expert formerly of FICO and Equifax.

What happens if you try to spend over your credit limit?

Thinking about spending over your credit card limit? Think again. In most cases, if you attempt to exceed your credit limit, your transaction will be declined. Some credit card issuers previously allowed over-limit transactions in exchange for high over-limit fees, but this practice has largely been phased out.

It’s important to remember that the closer your balance is to your total credit limit, the worse it is for your credit score. The amount of available credit you are currently using accounts for 30 percent of your FICO credit score — so maxing out your credit cards can have a serious negative impact on your credit score.

How to increase your credit limit

Increasing your credit limit offers numerous advantages. Not only do you gain more purchasing power, but you also have the chance to improve your credit score by raising your available credit and reducing your credit utilization ratio.

There are two ways to increase your credit limit: you can wait for your credit card issuer to offer a higher limit, or you can request a higher limit on your own.

Let’s look at both options in detail:

Wait for your credit card issuer to offer a higher credit limit

If you practice good credit habits, your credit card issuer may offer you a higher credit limit. “After you’ve had the card for some time, issuers are likely to adjust your limits based on your usage patterns,” Ulzheimer says.

These adjustments could raise your credit limit, but they could also lower it, depending on how you’ve been using your credit cards. Credit card issuers systematically review accounts and pull credit reports on cardholders to evaluate their current credit behavior and potential credit risk.

Request a higher credit limit

If you don’t want to wait for your credit card issuer to offer you a higher credit limit, you can always request one yourself. Many credit card issuers allow you to request credit limit increases through your online account or their mobile app. Alternatively, consumers can call their issuers and ask for an increase.

When you request a higher credit limit, make sure your credit card issuer knows about any recent changes to your financial situation that might affect their decision, such as a higher annual income or a recently improved credit score.

“If you have a track record of on-time payments and low balances, your credit card issuer will likely give you the increase as a ‘good-faith gesture,’” Lindeen explains. But don’t bother calling if you’ve been late on payments — and don’t request a higher credit limit if your current credit limit is maxed out.

The bottom line

How do issuers decide credit card limits? Some credit card issuers offer predetermined credit limits to every cardholder who applies, while others use a combination of factors to determine your credit limit, such as your credit history and credit score.

How can you increase your credit limit? You can often request a higher credit limit by filling out an online form or by calling your credit card’s customer service department. You can also simply practice good credit habits and wait for your issuer to offer you a higher line of credit.

FAQs

• What is a realistic credit limit if you’re just starting out?
  

  When starting out, a realistic credit limit for a first-time credit card holder is typically in the range of $500 to $1,000. This amount allows for responsible credit utilization and manageable monthly payments. As you build a positive credit history, you may become eligible for credit limit increases and access to higher credit limits over time.

• What is the average credit limit?
  

  The average credit limit can vary depending on your credit profile, income and the card issuer’s policies. Generally, for individuals with good to excellent credit scores, the average credit limit falls within the range of $5,000 to $10,000 or more. However, it’s important to remember that these figures are only estimates, and actual credit limits can vary widely among different cardholders.

• Which credit cards give the highest limits?
  

  Several credit cards are known for offering high credit limits to people with strong credit histories and stable incomes. Some premium travel rewards cards, as well as some business cards, are often associated with higher credit limits. However, the specific credit limit granted by any card issuer depends on your unique financial circumstances and creditworthiness.