What is a credit limit?

Once you have applied for a credit card, your provider will tell you its credit limit.

Your credit limit is the maximum amount you are allowed to owe on your card at any given time.

For example, if your credit limit is 1,500 and you have an outstanding balance of 1,000 on your card, you will only be allowed to spend up to a further 500 until you reach your limit.

If you go over your limit you will usually be charged a fee and may not be able to spend again until you pay off part of your balance.

What credit limit will you get?

You will only find out the credit limit a card will give you after you have applied.

Your provider will let you know the amount when they confirm your application has been accepted.

Providers state an "assumed credit limit" when they advertise their cards. There is no guarantee that they will offer you this amount - it is just used to help illustrate how much the card could cost.

How is your credit limit worked out?

Providers decide on how much to lend to you by assessing your application form and credit history. They will look at:

  1. 1.

    How much you earn and how much of this you have available to spend each month after your bills are paid

  2. 2.

    Any outstanding debts you have, like a mortgage, overdraft, loan or other credit cards. They will consider what percentage of your income these debts take up.

  3. 3.

    If you have never borrowed before, the provider will not know how well you can manage credit.

  4. 4.

    If you have borrowed before, they will look at your repayment history to see if you have a clean record or any missed payments.

  5. 5.

    If you have been their customer before, they will look at how you used your previous accounts.

  6. 6.

    What other credit is available to you, such as an unused overdraft or a credit limit on another card.

How to find your current card's credit limit

You can check the credit limit on your card by:

  • Signing into your account online or through its mobile app

  • Asking your card provider over the phone, email or post

  • Looking at any recent paperwork you have received

What happens if you go over your credit limit?

If you spend more than your credit limit, you will be charged a fee that will appear on your next credit card statement. This charge is usually 12.

Your provider could also choose to lower your credit limit and increase your interest rate, even if you have a low promotional APR such as a 0% deal on purchases or balance transfers.

It will also leave a black mark on your credit history, which could put off lenders when you apply for credit in the future or even cause your interest rate to go up on other cards you hold.

If you frequently go over your limit, your provider could even choose to close your account, and you will need to repay the debt within a short period of time.

What should you do if you go over your limit?

Contact your provider, offer to make a payment to bring your balance below the limit, then ask if they will waive the fee or agree not to report it on your credit record.

Your provider may even agree to increase your credit limit if you have held the card for several months and kept up with repayments.

How to avoid going over your credit limit

It is your responsibility not to exceed your limit, so make sure you know the limit for each of your cards. You can then keep an eye on your balance by checking it online, through an app, checking at a cash machine or asking your provider.

Most providers also let you set up an email or text message alert that will let you know when you are close to your credit limit.

How to increase your credit limit

You can ask your provider to increase your credit limit. Many providers will only review your limit after you have held the card for three to six months. You can do this:

  • Over the phone

  • Through your online account or mobile app

  • In writing

Your card provider will decide based on your credit history, income, other borrowing, other available credit and your repayment history with their card.

You can help the chances of your provider agreeing if you improve your credit history; this guide explains how.

However, having a higher credit limit means you will have to be careful to avoid spending beyond your means.

How to lower your credit limit

You can ask to decrease your credit limit if you want to remove the temptation of overspending. It can also help if you want to apply for credit with another provider and think the level of credit you currently have available is too high.

Decide on the new credit limit you would like, but make sure it will be enough to cover your spending on the card. You can then contact your provider to ask them to reduce your limit to this amount.

Can your provider change your limit?

Yes, your card issuer can change your credit limit without asking you.

They could decrease your limit if:

  • You exceed your credit limit

  • You miss a minimum repayment

  • Your credit history has been negatively affected by your handling of other cards or loans

  • You have used the card irregularly

Your provider could also increase your limit if they feel you would be able to handle the repayments or if you are often close to going over your limit.

Credit limits on balance transfers

If you take out a credit card to make a balance transfer, the maximum amount you can move over to your new card is set by the credit limit you are given.

If you were given a credit limit of 3,000 and your new card issuer let you use up to 90% of it towards a balance transfer, you could make a balance transfer of up to 2,700.