Credit Card Limits: How Does It Work?

Credit Card Limits: How Does It Work?

Holding high limits would allow you to spend further which can easily rack up tons of debt. Your credit limit is the absolute maximum value that your credit card issuer allows you to borrow.

What Is Credit Limit?

A credit limit is the authorised maximum amount that you can spend with a credit card. For instance, if your credit card limit is £1,500 and you have used up £500, you still have £1,000 to spend further.

Ways To Check Your Credit Card Limit

tickSigning in to your account online or using its mobile up when available

tickContacting your card provider in writing, phone or mail

tickChecking your latest credit card statement

Additionally, when you apply for a new credit card, the card issuer will inform you about the absolute limit of your card before conducting a full credit review.

How Is Credit Limit Calculated?

Among the things that lenders consider when granting you a loan or credit card is the chances of recovering back the money that you borrow. They can’t grant you more money if you don’t pay it back. Besides, each lender has its way of distinguishing the credit limit for each card. This ca include:

tickincome

tickcredit history

tickrepayment history

tickdebt-to-income ratio and other details.

How Does Credit Rating Affect Your Card Limit?

When applying for a credit card, your provider will run a credit review. Below are the two stages of credit check

Two Stages Of Credit Check

Soft Credit Check: Your card issuer or institution will check your personal details without leaving any mark on your credit record.

Hard Credit Check: Most providers conducts a full credit check to determine whether they will approve or decline the limit that you prefer. This can leave a mark on your credit file.

Information That Provider Will Check

When your provider scrutinizes your credit file, they will check for:

Outstanding Debts – they’ll check for debts and its status. This can include your mortgage, catalogues, credit cards and other types of debts.

Missed Payments – they will also check your repayment history to see if you missed any payments or have fallen to arrears.

Available Credit – they’ll check if you have any overdraft or another card.

Typically, the credit card company is evaluating how reputable you are as a borrower. If you’re allowed a bigger credit limit, it indicates that the provider is positive that you stay on top of your payments.

Can I Raise My Limit?

If you’re able to keep your payments regularly and paid your balance before it’s due, you can request to raise your credit limit. Most institution reassesses your credit limit every six months. Some may instantly raise your limit while others have to scrutinize if you’re eligible for a higher credit limit. Your provider might have reached out to you and offer the option to raise your limit if you’re qualified.

On the contrary, they can also reduce your limit due to the following circumstances:

tickExceeding your credit limit

tickMissing the minimum repayment

tickYour credit record is drastically affected by other debts

tickYour card is not often used

Can I Exceed On My Credit Limit?

You can exceed your credit limit but you’ll normally get charges when going over your card limit. This can result in you being able to spend until you pay off the outstanding balance.

Once you exceed on your limit, it can:

tickReduce your credit card limit

tickLose any 0% credit card offer you have on your card

tickAccumulate a higher APR on your card

tickHave a negative record on your credit

We suggest that you get in touch wot your provider, as soon as you found out that you exceeded on your limit. You can try to negotiate to pay for the balance and get on the same bracket or card limit again.


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