Your credit limit should be at least 3 times higher than your usual monthly spending. That's because your overallcredit utilizationratio should stay below 30%. If your spending exceeds that, you riskdamaging your credit score. That's why it's important to know what credit cards usually offer as a credit limit before applying for one.
What you should know about credit card credit limits:
- Credit card limits can be as low as $200.
- Somehigh credit limit credit cardscan offer limits starting with $5,000 and upwards of $10,000.
- High credit limit credit cards will generally be available only to applicants with good or excellent credit, and a high enough income to afford payments.
- On the other side of the spectrum,high limit secured credit cardsare open to applicants with bad credit, as they allow higher-than-average security deposits that establish credit limits and serve as collateral.
How to manage your credit limits and spending:
Whenever your spending habits change and your credit utilization ratio grows, you shouldrequest a credit limit increase, or apply for a new credit card. Your credit utilization accounts for roughly 30% of your credit score, so both are viable options if your credit card spending goes up.
In addition to a higher credit limit, a new credit card can also come with advantages, like extra rewards and better rates. It also enables you to adopt theIsland Approachand compartmentalize the use of your cards to maximize rewards and minimize finance charges. Feel free to also check out WalletHub's guide onhow credit limit is determined, to get a better sense of what you can expect.
This answer was first published on 10/29/21 and it was last updated on 11/04/22. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
