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Credit Card Credit Limit: How Do They Decide How Much I Should Get?


What Is Credit Card Credit Limit And How Much Do They Usually Give You?

Credit card credit limit is the maximum allowed transaction on your credit card. In other words, a credit card credit limit is a cap on the maximum purchases you can do with your credit card.

How much your credit card company allows you to charge on the card depends on the information you provided in your application for a credit card and your credit report. However, different companies use different methods to determine your credit card credit limit.

If you get a low credit card credit limit, it means that your credit card company has showed little faith in your capacity to use the credit cards and repay the used credit. On the other hand, a high credit card credit limit indicates that the credit card company highly trusts your ability to manage your credit.

So, how do credit-lending companies find out how much credit card credit limit they should give you? Even though every credit card company has its own procedure to determine what limit you should get, yet here are some basic factors they use in their decision:

The Simple Procedure

Some credit card issuers have put a predetermined limit on their credit cards. For example, a gold card may have a limit of $2,000 while a platinum card could have a limit of $5,000. These credit card credit limits would respectively apply to anyone who is eligible for these cards. However, when you apply for a platinum card with $5,000 limit, it never means that your application would be approved immediately. The issuer may check your credit history, requirements, earnings or credit score to determine your eligibility. Once you become eligible, you get to enjoy the associated credit limit.

The Credit History Method

Some credit card issuers would use your credit history to decide what credit card credit limit you should get. The process imitates the method issuers use to determine your credit card interest rate. For example, a credit card may have credit limit between $500 and $3,000. If your credit score is higher, you will get a credit card credit limit of $3,000 whereas those with lower credit score will get a credit limit below $3,000.

The Sophisticated Method

Some issuers would make painstaking efforts to determine a credit card credit limit for you, so they can minimize their risk. They will take a number of factors into account, such as credit score, bankruptcy score, and debt-to-income-ratio among a host of other variables.

Credit Limit Consistency

No matter how much effort your credit card company puts into determining a credit limit for you, the limit does not remain consistent forever. Some time after you get your card, the company may make adjustments to your credit limit on the basis of how you handle the card. This means that either they would cut your credit limit or increase it, depending on how much you use the card and how you make repayments.

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