Credit Card Credit Limit

Any credit card holder can only become a responsible customer when they know and understand the crucial aspects of credit card dealings. One of these is the credit card credit limit set by the issuing authority when they grant the credit card to any customer. Therefore, the card holders should be aware of the credit card credit limit and its effect on their finances and other aspects.

What is the Credit Card Credit Limit?

The credit card credit limit signifies the maximum amount of outstanding balance that the credit card holder can have on their credit card. They might get penalized with over limit charges if they continue to use the card for purchase and transaction beyond this particular limit or line of credit. The line of credit means any flexible loan provided by a bank or a union. Therefore, proper management and staying within the credit limit is crucial for the avoidance of debts and to keep a healthy credit score overall.

Credit card credit limit is the maximum amount lent to the card holder by the institution which issues the credit card. This issuing institution can extend the credit limit in credit card whenever they deem fit to do so. The credit limit is usually set depending on the information that has been provided by the customer who is seeking to obtain a credit card from the issuer. The credit card credit limit can also have an effect on the credit score of the card holder, thereby impacting their chances of securing credit either positively or negatively in the future. The issuers go through the credit rating of the customer, income, repayment of loan in the past and several other factors before setting the credit card credit limit.

How Does Credit Card Credit Limit Work?

The credit card credit limit or even line of credit is determined by the bank or any authority issuing the credit card. They go over the income of the person who has applied, the current debt that they carry and their credit history to ensure that they will pay back the credit used well within the due date. If the credit history highlights that the person has a habit of late repayments or has a sizeable amount of unpaid debt at the time of the application, the approval of the credit card may come with a lower credit limit to start with.

Credit Card Credit Limit

The person who has applied does not generally get to know the credit limit for the card until the application process has been completed and the approval comes through. However, there is an exception to this routine if the person opts for secured credit card. This card is obtained by a cash deposit which can be used to pay off the debt if the card holder does not repay within the due date. The issuing authority generally provides a credit limit that is the equivalent of the security deposit in this scenario. However, if the credit card credit limit in any case is not what the person wanted and is lower than the expected amount, the person can request for a higher credit limit in credit card and when this does not work, turn down the credit card eventually.

An important point to note is that there should be no disappointment from the applicant’s side if the credit limit is a bit low. This is because the credit card credit limit is flexible and therefore is subject to change from time to time. If the card is used in a responsible manner and the repayments done by the card holder are usually on time, this might make them eligible for a time to time increase in the credit limit. This may or may not be on the card holder’s request and can be initiated from the side of the bank or institution which is the issuer in this case.

However, the vice versa is also possible in that if the credit score of the card holder is not up to the mark and they are falling behind on repayments with constant debts, the credit card credit limit can be decreased by the issuer. The credit limit is also mentioned in the credit card statement generated at the end of a month or billing cycle. 

Does Every Credit Card Have a Credit Limit?

Not every card has a standard credit limit set to it in that there are no limitations on the limit that can be spent, at least not a fixed one. These are called charge cards and they usually charge no interest, requiring the card holder to pay the outstanding balance in full on a monthly basis. These provide benefits to the users or customers but they charge a very high annual fee generally. Any unpaid outstanding balance will be charged with penalties and stiff fees. Non payment will also be reported to the credit bureau, impacting the credit score of the credit card holder negatively.

Which Factors Determine the Credit Card Credit Limit

When any person applies for securing a credit card, it is granted with a set credit limit decided upon by the bank or organization which has issued it. This decision is reached by considering several factors that may affect the repayment pattern of the credit card holder, according to the issuer. The factors that may affect the credit card credit limit are:

  • Age of the person
  • Income of the person
  • Credit Amount to the name of the person
  • Current debt amount of the person
  • Employment status of the person
  • Credit Score


Credit Limit in Credit Card

If the person has applied for obtaining a credit card for the first time in their life and therefore does not have any credit history, the credit limit that is set by the issuer will most probably be low due to the lack of an important determining factor. It is a decision taken by the bank because they are not aware of the repayment pattern and do not know the person in any way. 

However, the credit limit set may not be low for a long time which is a positive thing. If the card holder uses the card regularly and pays off the outstanding amount in a billing period for a majority of the time, the bank or issuer will eventually provide them with a choice to opt in for a higher credit card credit limit.

Which Factors Increase Credit Card Credit Limit?

  • Income statement of the user – If the income of the credit card holder has increased and the credit card is the one that had been obtained before this increase, the credit limit for that card can be increased too. The user has to contact the bank or institution that has issued the card and can provide the recent payslips as proof of increase in the income. This gives you ample ground to request the bank to increase the  credit card credit limit and provide a credit card upgrade too.
  • Regular use of the credit card – The card holder can use the credit card often during transactions while paying back the outstanding balance in total at the end of a billing cycle before the provided due date. If they do so, the bank or institution will itself increase the credit limit for that particular customer.
  • Applying for a new credit card – The customer can always consider applying for a credit card that has a higher credit limit than the one that was being used by them. It will be easier to obtain a new one if the card holder has been using the old credit card regularly and making repayments on time, thus keeping a good credit score and credit history.  
  • Requesting for an increase in credit limit – The easier way here would be to just send over a request to the issuer of the credit card to increase the credit card credit limit. A majority of the time, the banks consent to such a request and provide an increased credit limit. However, this is based on the reason given for requiring an increase in credit limit. This request can either be made online through the use of netbanking or offline by visiting any branch of the bank or institution that has issued the credit card in person. 


How Does Credit Card Credit Limit Impact Credit Score

The credit score is nothing but an analysis or go through of the credit history of the credit card holder. The credit score is displayed in numerical figures and is seen as proof of the fact that the credit card holder is either credit worthy or not. When the user utilizes the  credit card credit limit often, it can affect their credit score because the issuing authority of the credit card reports the credit limit and credit utilization to the credit bureaus on a monthly basis. This information is the real decider of the credit utilization ratio. The ratio is calculated by dividing the revolving credit amount that has been utilized by the card holder and the total revolving credit amount available to them. 

Therefore, the credit utilization ratio between 10% – 30% is usually seen as good and affects positively on the person’s credit history. For the credit score to be high, the credit card holder is required to use the credit card credit limit responsibly and keep the credit utilization ratio low. A high credit utilization ratio will translate to a poor credit score for the credit card holder. Therefore, if the user wants to keep the credit score high and credit utilization ratio low, the following should be considered.

  • Regular and monthly repayments of the outstanding balance
  • Keeping well within the credit limit
  • Reducing the additional charges and liabilities

Difference Between Available Credit and Credit Limit

Available Credit

Credit Limit

Available credit is defined as the portion of a card holder’s credit limit that has not been used by them. 

Credit Limit is the maximum amount that can be spent by a card holder in a particular billing cycle.

For example, if the maximum amount that is spent on a credit card is Rs 1,00,000 and the card holder spends Rs. 50,000, the available credit would be Rs. 50,000.

For example, if a card holder can spend a maximum amount of Rs. 1,00,000 in a particular billing cycle, generally a month, the credit limit of the card would be the same figure.

Available credit keeps changing throughout the billing cycle as the person’s purchase and transactions increase. 

Credit Limit is fixed at a single amount and remains the same irrespective of any expenditure from the credit card by the owner.

As the credit utilization ratio increases, the available credit decreases. 

Credit Limit is used as one of the determinants of credit utilization ratio and is not subject to change with it.

Benefits of Increasing Credit Card Credit Limit

  • Lowers the Credit Utilization Ratio – When the  credit card credit limit is increased, the credit utilization ratio goes down if the person’s expenditure remains almost the same as before and even with a slight increase.  There is an inverse proportionality in both because the higher the credit limit, the lower is the credit utilization ratio. This is because if the credit limit goes higher, the percentage of credit used from the credit limit inevitably goes down.
  • Carries some additional benefits and perks – More often than not, the cards which have a  higher credit limit generally bring some additional perks to the card holder. This is not available to the card users who have a lower credit limit. 
  • Helps the card user during financial emergencies – A credit card with a higher credit limit can be of great use during financial emergencies and even during health related emergencies. The credit card can be used when the card holder is facing a financial crunch and has an important expense at hand. 
  • Makes it easier for a customer to get approval for a loan – When the card holder has a higher credit limit combined with a relatively low credit utilization ratio on the card, the banks will favor the customer. This also means that the person will have a higher credit score and healthy credit history, thus making approval quite easy.


If the card user does not want to be curbed by the  credit card credit limit, they can opt for a card which does not have a firm credit limit or cards that have no preset credit limit. The latter does not mean that the users will be able to spend an infinite amount of credit without any limit. It just means that the spending limit or credit limit in these cards keeps changing according to the spending patterns, credit history, changes in income and any other factors that might affect the repayment of credit.