What is a good credit limit?



Unfortunately, credit card issuers rarely publish their credit limit ranges. In most cases, you won’t know what credit limit you will be getting until you apply and get approved. Although these ranges vary from map to map, the type card can often give you an idea of ​​what to expect.

For example, student credit cards are designed for people who are just starting to build credit. As a result, they typically have starting credit limits of less than $ 1,000. So if you’re given a credit limit of $ 750, that’s probably a pretty good limit.

However, if you applied for a regular cash back rewards card, that same $ 750 limit could be considered a low credit limit. This is because the best cash back cards often have starting limits of between $ 1,500 and $ 2,500.

Premium Rewards credit cards usually have even higher starting credit limits. And luxury travel rewards credit cards – think top cards with high annual fees – typically have an initial credit limit of at least $ 5,000. As such, if you have one of these cards, you might consider a credit limit of $ 5,000 to be bad and a limit of $ 10,000 or more to be good.

Overall, any credit limit of five or more digits is widely accepted as a high credit limit.

The main exception to the usual credit limit rules are secured credit cards. The difference between secure and unsecured cards is the security deposit. Secure cards require a cash deposit to open the account. The credit limit of a secured card is usually equal to the size of the deposit.

Your credit limit must meet your needs

Now even a high credit limit can be considered bad if it is not high enough to meet your needs. If you apply for a balance transfer credit card and get a limit of $ 10,000, most people would think that’s a good limit. But if you need to transfer $ 11,000 in credit card debt, that “good” limit is not quite enough.

This is a common problem for many people with small business credit cards. A credit limit of $ 15,000 is objectively good. But you might think that a $ 15,000 credit limit is bad if your business has to charge $ 25,000 every month. Having to make multiple card payments just to use your card is inconvenient at best.

How to determine the right credit limit for you

A simple rule of thumb for deciding if you have a good credit limit is to consider how much you regularly spend between payments. Ideally, you don’t want your credit card balance to exceed 30% of your credit card limit.

Why? It depends on your credit utilization rate. Your credit utilization rate is the percentage of your available credit that you use. For example, let’s say your credit card limit is $ 5,000. If your balance is $ 1,000, your usage rate would be 20% ($ 1,000 / $ 5,000 = 0.2, which equals 20%).

The use of credit is one of the five factors that go into your credit rating. High usage (over 30%) can cause your credit score to drop significantly. And maximizing a credit card can cause a lot of damage. On the bright side, your credit score should rebound after you pay off your balance.

As long as you don’t regularly use more than 30% of your credit limit, you can consider it a good limit. Anything higher than that is the icing on the cake.

What is the average credit card spending limit?

It’s human nature to compare what we have to what others have. You might be wondering what the average credit limit is. There is no easily navigable list of average credit limits for every credit card available. But Experian found that the average U.S. cardholder had a credit limit of $ 31,015 in 2019.

Read more: What is the average credit card limit?

How to increase the credit limit on your card?

The great thing about credit card limits is that they are usually not set in stone. The initial limit given to you upon approval is just that: a starting limit. Most credit card issuers will allow you to increase your credit limit over time.

In some cases, you don’t have to do anything to get a higher credit limit. Many issuers will periodically increase your credit limit without even notifying you.

You can also request an increase in the credit limit. Most card companies allow you to do this directly from your online account. Keep in mind that requesting a credit limit increase may require a large request for credit. This can lower your credit score by a few points.

Read more: How to increase your credit limit

When thinking about your own credit limit, remember that it really depends on your credit history and spending needs. And if you need a higher limit, you can work on qualifying for one over time by using your credit card regularly and paying its bills on time every month.

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