It’s vital to know your credit limit before you start buying stuff on your credit card.
Your credit card limit will be included in the info mailed together with your credit card.
If you have an online credit card account, you may be able to log in and view your credit limit online.
What's A Credit Limit?
This is the maximum amount a lender allows you to borrow on a credit card at any one time.
After applying for a credit card, your lender looks at different factors to determine what your credit limit should be.
Why Do Lenders Give Such Low Credit Limits?
You might not have as much credit limit as you like and are wondering why.
When deciding whether to accept your application and what credit limit to offer, lenders look at your credit history and other key factors.
These factors include:
- Your net earnings – if what’s left after your monthly expenses is small, expect a low credit limit.
- Debts with other lenders – personal loans, auto loans, mortgage and other credit cards.
- Your current credit – this includes the limit on any authorised overdrafts, store cards or credit cards you have available.
- Your repayment history – expect a low credit limit if you have missed on debt payments in the past.
The above factors help lenders to offer you a credit limit they’re confident you can afford. But that doesn’t mean that you are powerless against low credit.
What Happens If I Go Over My Credit Limit?
The average credit limit in the UK is £3,000 – £4,000.
Normally, the credit card will decline the purchase when you make a purchase that goes beyond your credit limit.
But this is not always the case. Sometimes, they may let it go through.
There are consequences for going over your limit. They range from getting a small penalty to longer-term effects like damaging your credit rating and getting your account closed.
Can I Request My Credit Limit to be Increased?
Some credit card issuers will automatically increase your credit limit after you’ve had the card for a while and made timely payments.
Before you request a limit increase, check the limits on your card to see if the lender has extended it.
If you’re unhappy with your credit limit and would like to change it, you can contact your credit card provider and tell them the new credit limit you’d like.
They will scrutinise your card use and credit history to approve or refuse the credit card limit increase. If your income has improved, that’s something you should mention. They’re often able to provide you with instant approval.
Your card provider will have a policy on credit limit increases. Some providers only offer an increase once you’ve had the card for 6 or 12 months. So, if you happen to be a new customer, it’s a good idea to wait for several months first.
If you’re denied, don’t fret. Ask your issuer why they declined your request. This will help you figure out how you can improve your chances for approval in the future.
What to do With the Low Limit Card?
Whatever your credit limit, there are ways you can position yourself to improve your chances of getting a higher credit card limit:
- Never miss a payment
- Use your card regularly and sensibly
- Give it time
- Don’t request a credit limit too often
- Review your credit report for errors
Remember, if you’re contemplating requesting a higher credit limit, there’s a greater risk you’re borrowing too much. Ensure you can afford the repayments and the interest that will be charged.
Also, if you’re planning to apply for a mortgage or an auto loan, lenders could consider you a risky borrower because they may assume that you plan on taking on more debt.
Conclusion
If you have a good grip on your finances and can keep balances low, increasing your credit card limit could be the key to opening up your financial opportunities.
It will lower your credit utilisation ratio, help during an emergency, make it easier to secure a loan and give you access to credit card perks.