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What are credit card limits?

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Whether you’re choosing a 0% balance transfer card, 0% purchase credit card or travel credit card, you will always have a credit limit indicating the maximum you can spend on the card.

Your credit limit is invariably based on your creditworthiness as a borrower and how much the card provider is willing to give you as part of the credit card offer you have chosen. To make things a bit clearer, we’ve put together all the information we can on credit limits so you can understand how they are calculated and how to avoid exceeding them.

What is a credit limit?

  • A spending limit imposed on credit cards by the provider
  • You will be informed of the limit after you have applied and been accepted
  • You will be penalised for spending over this amount

A credit limit is given to you as part of a credit card offer, indicating the maximum amount you are allowed to spend. For example, if your credit limit is £2000 and you have already spent £800, you will be able to spend another £1200 before being penalised.

The credit limit is not usually advertised when you’re browsing credit cards, though you might get an idea what the maximum could be. You will only be told your credit limit once you have successfully applied and been accepted for credit.

How are credit limits worked out?

Your credit limit will be calculated based on your previous credit history and what the provider is willing to lend as part of the credit card offer. A provider will only give you a limit once you have been accepted for a credit card, so you should only accept the offer if you’re happy with the limit that has been provided.

Your limit will be calculated based on the following two checks:

  • Soft credit check – this will normally occur as part of an eligibility check (such as moneymatcher) but will not affect your credit score. You will need to supply a few minor details which will allow you to check the likelihood of you being accepted for certain credit products
  • Hard credit check – this will occur once you’ve clicked submit on your application and will be based on your personal details and credit history. This will usually have an affect on your credit score meaning that if you’re rejected then your score might go down.

If you are subsequently accepted for credit you will then be given a credit limit for your card. If you have had previous issues with repaying a credit card or a personal loan you might find that the limit will be reduced. However, if you haven’t had any issues before and have a good credit score, chances are you will be given a higher amount.

Going over your credit limit

Your credit limit is in place to indicate how much a provider is willing to lend you. Once you have been given a limit you should try your best to stick to it and not overspend as much as possible.

If you end up going over your credit limit you will likely be hit with additional fees added onto your balance. Your credit card provider should inform you of how much you will be charged through the summary box document that comes with your credit card, so it’s worth reading this before you start using the card.

If you continue to be over your limit you will face further penalty fees and could even be given a County Court Judgement (CCJ) for refusing to repay what you owe. Along with reducing your credit score this will harm your chances of being accepted for credit in the future, so it’s worth staying below your credit limit.

Can your credit limit change?

Your credit limit can change depending on how you’ve used the card and whether your provider is happy to still let you borrow money.

If you have kept spending to a minimum and paid more than the minimum off every month, you might find that your provider will offer to increase your credit limit by a certain amount. The best thing to do in this situation is to only accept the increase if you plan on using it. Remember, spending too much and being unable to pay it back can have a negative impact on your credit score.

On the other hand, if you have overspent on your credit card or have had a history of poor money management, your provider might decide to decrease your credit limit to stop you spending so much. It’s usually down to the card provider’s discretion.

How to change your credit limit

If you would like to change your credit limit, it’s always worth getting in touch with your card provider first and foremost, to see if they can advise you. You might be given an instant decision on the spot on whether you can have a larger limit, or if they’re unwilling to give you any further credit.

Start comparing credit cards

If you’re happy with how credit limits on a credit card work, you might want to start browsing credit cards for yourself. Before you do so, why not fill out our moneymatcher eligibility tool to see the likelihood of you being accepted? This easy form takes a few minutes to fill in and won’t affect your credit score.

Robert Bester - Content Writer