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PDS credit card limit header

Credit cards: What do I need to know about my credit card limit?

Limits are applied to all credit cards as a way of controlling the amount a lender is willing to let you borrow. The limit is also there to show you how much you can spend on the card without having a fee placed on what you have spent.

So whether you are thinking about getting a credit card or you just want to know more about credit limits, here is some information that you will need to know. To find out more about credit limits or for any queries regarding your own credit limit, get in touch with your lender or take a look on a reputable web site such as Stepchange.

What is a credit card limit?

At the end of application process for a credit card, the provider will tell you the credit limit your card has been given. This is the maximum amount you can spend on the card at any one time and if you try to go over it then the payment may be declined or you will be charged a fee as well as being unlikely to spend on your card again until you pay off some of the balance.

The fee you are charged for exceeding your credit limit will be decided by your lender and it is usually their standard fee for any overspending. If you are unsure of what the fee is for overspending on your credit card, read the terms and conditions for the lending agreement or get in touch with your credit card provider.

How is my credit card limit worked out?

You will find out your credit card limit once you have applied for your credit card and it has been accepted by the provider. The ‘assumed credit limit’ advertised with the card is not always the limit you will get as lenders tend to look at a few areas prior to deciding on the amount they are comfortable letting you borrow. These areas are:

  • Your earnings and how much you have left after bills and other regular payments.
  • Any outstanding debts you have including mortgages, loans and credit cards and how much of your income these take up.
  • Whether you have borrowed before or not. If you have, they will look at your repayment history for missed payments etc. and if you haven’t borrowed before, they may be wary as they will not know how well you can manage credit.
  • Have you been a customer of theirs before? How did you manage your accounts previously?
  • Any unused credit you have available to you such as an unused overdraft.

PDS credit card limit content

Can I increase or lower my credit card limit?

If you would like to lower or increase your credit limit then you can ask your provider to lower it or consider increasing it. Lowering your credit limit can remove the temptation of overspending or help your application for credit with another provider if your credit limit is too high. Decide on the new limit you would like based on the amount you think you need before contacting your provider.

When asking to increase your credit limit, you can do this by phone, online or in writing and it is worth only looking into this if you have held the card for at least three to six months. When considering raising your credit limit, your lender will look into your current borrowing and your repayment history on your credit card.

What will happen if I go over my credit limit?

When you go over your credit limit, you will be charged a fee that will appear on your next credit card statement. Your provider could also decide to lower your credit card limit or increase your interest rate even if it is a promotional interest rate such as 0% interest for 24 months.

Going over your credit limit can also have an adverse impact on your credit file which may put off some lenders when you apply for credit in the future. Some lenders could refuse to lend to you or offer you higher rates than you would otherwise get.

If you go over your limit regularly then your provider can close your account and you will then need to pay off the remaining balance in a short period of time. If you do go over your credit limit, you will need to contact your provider as soon as possible to make an offer of payment which will bring your balance back below your credit limit. You can also ask your provider if they will waive the fee or agree to not report this on your credit report.

My provider has automatically changed my credit limit, what can I do?

Credit card providers are within their rights to lower your credit limit without asking you and they would likely lower you limit if you exceed your limit, miss a minimum repayment, have used your card irregularly or your credit history has been negatively affected by the way you are handling other cards or loans you have.

Lenders can also increase your credit limit if they think you would be able to handle the increased cost of repayments or if you regularly end up close to your limit but have never missed a repayment. However, this is becoming a problem for many people who are struggling with problem debt but are seeing their credit limits raised by their lender.

If this happens, get in touch with your lender to ask them to lower your credit limit to a figure which would be better to help you manage your debts. If you are struggling with problem debts, such as credit cards, get in touch with us on 0800 901 2488. Our friendly advisers are knowledgeable in this area and can help you to find the solution to your current financial problems.

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