Average Credit Card Limit
Last Updated: January 11, 2023
Do you know what your average credit card limit is when your bank or retail store approves your first one? When your bank or store issues you with your first card, they’ve gone through your application and credit report. Based on a number of factors, they’ll approve a certain credit limit on your card.
Of course, not everyone is eligible for the highest credit card limit, and some cards are capped at a certain limit themselves. Knowing the maximum amount you can spend on your card is key to responsible credit-based spending.
Let’s talk about the credit card limit and what you can do to change it.
What Is a Credit Limit?
You probably have a debit card, and you’re probably used to it, and you expect the credit card works the same way, right? Well, there’s a bit more to it, so we’ll discuss what makes credit cards different.
With debit cards, you usually don’t have to worry about getting approved, about total credit available, or about spending limits. You simply spend the money you have on your bank account, and if there’s a limit on that, it’s set on a daily basis.
When applying for a credit card, on the other hand, you’ll often hear the words “credit limit.” But what does the term credit limit mean exactly, and why should you care about it? Should you care, even? Put simply, the credit limit is the amount your bank or any other financial institution will lend you. This is the maximum amount you can spend on your card and is based on information such as your credit report. It’s also sometimes referred to as a credit line.
Borrowers get credit limits that depend on their perceived risk. Naturally, the highest credit card limit is reserved for low-risk borrowers rather than for debtors who don’t manage their repayments or spending well. High credit limits also won’t be issued to someone who has a bad credit score. However, having a high credit limit with comparatively low income also means you can end up overspending and not meeting your monthly repayment obligations.
For first-time credit card holders, understanding the importance of managing your credit limit and repayments is essential if you want to build a good credit score. Your first credit card limit is usually low until your income improves or you build up sufficient capital.
While you can spend the maximum amount on your credit card, if you exceed the limit, you’ll be faced with costly fines and penalties. The same applies if you’re not able to meet your average credit card monthly payment on a regular basis. Bad management of your card’s limit will result in the lowering of your credit score. This, in turn, will negatively influence your credit applications with financial institutions in the future.
When applying to any financial institution for a credit card, especially for the first time, being aware of factors influencing your application is crucial. Your credit score is one of the most important factors that determine the total credit available to you.
How Does a Credit Limit Work?
A financial institution considering your credit card application will take a number of factors into consideration before deciding on your credit limit. While a first-time credit limit is normally low, factors such as how much capital you have will influence the amount you’re allowed to spend.
Other factors that influence a typical credit card limit includes the following:
- Your personal income
- How you’ve handled repayments on other loans
- Your credit rating or score (based on individual scoring by bureaus such as Equifax or Experian)
- Other credit card accounts you may have (this includes retail store credit cards)
When issuing a credit card with a limit, financial lenders will always look out for red flags such as how much open credit a person has. This includes several lines of credit plus high credit limits on other accounts. Access to too much credit without enough income means that the borrower can overextend on their spending, increasing their debts, and not be able to make repayments.
Your credit card spending limit can also be influenced by your age and if this is your first application. Different card issuers will also use their own criteria to determine what kind of credit limit to give you. However, most use all of the abovementioned factors in addition to your average credit card history age. Financial institutions are more comfortable with cardholders who’ve managed credit over a longer period in a responsible manner.
A quick tip! If you travel a lot check out our selection of cards with the most perks for frequent flyers. Your application will undergo the same process as above but this type of credit card makes it easier when you need money abroad.
How much credit card limit can I get?
Financial institutions won’t volunteer the average credit card amount on any card until your application has been fully reviewed. Cards such as World Elite Mastercard and Visa Infinite have no spending limit stipulated. However, these cards are only issued to borrowers with a solid credit history and payment and purchase records.
Visa offers a range of credit card options, including the Open Sky Secured Visa for those without a credit history. This is one of the best credit cards for young adults available as it allows you to build your credit score. Your deposit acts as your credit limit and ranges between $200 to $3,000, and there are annual fees included.
Credit card processing networks will always determine your average credit card limit by income, age, and how good or bad your credit score is. The exact amount varies from borrower to borrower, which is why it’s not easy to know how much limit you’ll be approved for before your application is assessed.
Some of the best credit cards, such as the Bank of America Cash Rewards Credit Card, offer excellent credit limits as long as your credit score is high. Another Visa card that requires an excellent credit score for unlimited spending is the Chase Freedom Unlimited card.
Your average credit card limit really depends on fulfilling the criteria set out and used by card issuers when reviewing your application. By being aware of the key factors that determine your credit limit, you can aim to always manage your debts better if you want a higher credit line on your card.
A quick tip! Remember that credit card limits are included in zero-interest credit cards. The reason why some applicants request these cards is when a large purchase is made or you want to consolidate your current debts.
What Is the Average Credit Card Limit?
Knowing your credit limit and managing it responsibly ultimately affects your credit score. You also want to know your limit will be sufficient for covering most of your expenses, including your online shopping sprees! But, what is the mark of an average credit card limit? And, is it enough to cover your spending budget?
According to the latest Experian Consumer Credit Card Report, the average credit limit for US cardholders has dropped from $31,371 in 2019 to $30,365 in 2020. What’s interesting to note is that the average credit limit in 2010 was $25,988 — indicating an annual change of around $500 until 2019. The same report shows that an average credit card balance is $5,315.
Furthermore, this Experian report indicates a significant drop in average credit limits across all generations from 2019 to 2020. The following figures are an indication of the average credit limit for the different cohorts in 2020:
- Generation Z: $1,963
- Millennials: $4,322
- Generation X: $7,155
- Baby Boomers: $6,043
- Silent Generation: $3,177
While your average credit limit by age is a standard consideration by all card issuers, other factors such as the length of your credit history have an impact. Income and the capacity to spend money also influence the average credit limit. The generation categories give a good indication of who the high earners are and therefore have higher credit limits.
How Much Credit Can I Get Approved For?
The first step to getting a credit card is completing an application form with the lender. The financial institution will use this personal information to gather relevant data in order to calculate your credit limit. Every lending institution will use a different process for determining your max credit card limit, but they are guided by the following:
- Credit score: This is an overall rating given on your credit report, and it can range from poor to excellent. Factors that affect credit score are important indicators of financial health and can help determine your limit. High credit card limits are often approved only for applicants with very good scores.
- Credit history age: Your credit history age will tell a lender how long you’ve had credit and how well you’ve managed it. The older you are, the more credit you’re likely to have had since earning an income. Many institutions also feel older people are more responsible when it comes to proper credit management.
- Personal income: Credit history ranks above your earnings, but a higher income does often mean you’ll get a good credit limit or terms.
- Multiple credit card accounts: To calculate your credit limit on a new card, most institutions will factor in the amount of credit you already have. This could mean your credit limit on the new card will be lower if you’ve already reached your credit card cap.
With so many different factors influencing the calculation of your credit card limit, it’s not easy to estimate what the lender will grant you. It’s important to keep in mind that your credit score may be temporarily lowered if you’ve already taken out a credit card. However, this penalty should go away quickly if you use your card responsibly.
Available credit also plays a key role in determining your credit limit.
What is available credit?
Card issuers want to know your credit utilization, which is your credit card debt expressed as a percentage of your total credit limit. Available credit also refers to any amount available to the borrower to spend. Available credit has a specific meaning, and it’s defined as the difference between your current account balance and credit limit, which is the amount you can still spend.
How to Raise Your Credit Card Limit
Credit card issuers won’t always keep your amount in line with the average credit card limit, and this may seem frustrating, particularly if you don’t get as much as you wanted. However, keep in mind that lenders calculate your limit according to the abovementioned criteria and that as those values change, your credit limit may change with them.
For example, the Discover card credit limit increase is automatic, but only if you pay your accounts on time and the lender is satisfied with your creditworthiness. However, not all credit card limits increase automatically. If you want to raise your credit limit, it’s possible. But, you’ll need to consider the following:
- Your existing credit card company may carry out a more in-depth credit inquiry which could have negative outcomes for you. For example, your credit score number may have changed since your first application, and you could be left wondering why your credit score dropped!
- Your credit utilization ratio isn’t under 30% which makes lenders nervous about increasing your limit.
Knowing what is a good credit limit is key to deciding whether you should apply for an increase. If you decide that you still want a raise, then take the following steps:
- Speak to your credit card company: You can submit an online request or speak to someone at the institution for a credit limit increase.
- Improve your credit score: Higher credit limits are often approved when your credit score is improved. How you use your credit card, having low account balances, and being timely with your repayments, will all make a difference to your score number.
- Increasing your income: If your monthly earnings have increased since making your first credit card application, you can approach the lender for a credit limit increase.
Comparing your credit card limit with your best friend and discovering they have a higher credit limit may make you wonder why yours is lower. However, remember your credit card company determines what is a good credit limit for you based on your creditworthiness.
How much should I increase my credit limit?
Knowing your debt-to-income ratio will help you decide how much you should increase your credit limit. This ratio will give an indication of your capacity to make regular, monthly repayments.
Your credit limit vs income ratio is a vital criterion used by card issuers and it entails knowing what your total monthly debt repayments are compared to your monthly income whenever you make an application for a credit card or an increase in the limit amount.
Before requesting a raise in your credit limit, consider cashback credit cards or cards that give you sign-up bonuses. These cards give you benefits that may be sufficient without having to increase your limit.
In order for your credit card application to be successful, you need to ensure your creditworthiness is good. Your credit limit is based on criteria such as your credit history age, your credit score number, and how many other credit cards you have.
Calculating your credit limit will also be affected by your personal income, credit utilization, and what other monthly debts you have to settle every month.
How to choose a credit card that meets your personal spending needs also depends on the same criteria. And, while having a high credit limit may seem optimal, it’s vital to know what is a good credit line or limit for your own budget. This way, you can be a responsible credit card holder, keeping your credit score high at all times.
The general rule of thumb is that you should have around 70% of your credit limit available. This is based on the standard recommended credit utilization ratio, meaning you can use 30% of your credit limit without worry about how it’ll affect your credit score.
A total credit line is the predetermined limit up to which you can borrow from a financial institution before being charged a penalty. A credit line is the amount that can be charged to your credit card. When looking at credit line vs credit limit, they both have the same meaning when it comes to credit cards.
A credit line is determined by factors such as the length of your credit history, annual gross income, credit score, and how many credit accounts you have. Your repayment history will be taken into account, as well as your age. Low credit line credit cards may be approved for applicants with bad credit wanting to improve their credit score.
Credit cards for people with bad credit are designed to help build a credit history, making it easier to qualify for other loans.
Your average credit card limit can be influenced by your income. A high-earner can estimate a credit limit of approximately $10,000. A credit card applicant with a stable income can expect a credit limit of between $3,500 and $7,000 as long as their credit score is good.