Credit limit do’s and don’ts

If you’re not sure about credit limits, you’ve come to the right place. With these credit limit do's and don’ts, you’ll be clued up in no time.

Your credit limit is the maximum amount you’re able to spend on your credit card. The amount you receive will be decided on by your lender after they look at things like your credit history and application details.

Let’s take a look at the do's and the don’ts of your credit limit:

Credit limit do's

Find a manageable credit limit

If you’re applying for a credit card, you might be asked about the amount you’d prefer. Asking for a high limit could make it seem like you’re financially stretched, which could put off lenders.

It’s important to find a limit that you feel you can comfortably manage. If you’ve got a low income, it doesn’t make much sense to have a high credit limit – as you could end up spending more than you can afford. Take a look online and shop around to find a credit limit that suits you.

Bide your time

Sometimes in life, it’s better to play it cool. And when it comes to credit limits, that’s certainly the case.

Many credit card providers offer you credit limit increases each year, so chances are, they’ll offer you an increase when they feel you’re ready. So, if you’ve made your repayments on time and remained within your limit for long enough, your provider might increase your limit.

If you ask for more credit before you get offered, it could make you seem a bit desperate. Asking for a limit increase shortly after you’ve received your card could send warning signals to the bank and could even negatively affect your credit score – so it’s definitely worth holding back for a while.

Use your limit responsibly

Credit reference agencies, like Equifax, tend to recommend using less than half of your credit limit. So whether you’ve got a huge limit or a tiny one, the general rule of thumb is to stick to around 30% of your available credit.

It might be wise to use your card for small but regular purchases. Whether it’s that cheeky weekend takeaway or your monthly trip to the cinema, small purchases on your credit card could help prove you can use your limit responsibly and make your payments on time and in full.

Lower it if you’re struggling

It can be hard to refuse a credit limit increase – after all, why say no to extra cash if it’s being offered to you?

But if you’re already feeling stretched, the temptation to spend more credit could be a slippery slope you’re better off avoiding. If you find yourself dipping into more and more credit to make ends meet, it’s a good idea to contact your credit provider and lower your available credit.

Credit limit don’ts

Exceed the limit

At the risk of stating the obvious, the biggest credit limit faux-pas is exceeding your limit. If you spend more than you have available, you’ll likely be charged a fee which will be taken off your next statement.

It’ll also leave a black mark on your credit history, which could limit your options for credit going forwards.

Top tip: see if your bank offers email or text alerts to help you keep track of your spending

Use a large amount of your limit

In a similar vein, while it’s not as bad as exceeding your limit, using up too much of your limit is also a no-no.

It comes back to that ‘credit utilisation’ we keep bringing up. Spending too much of your limit could tell lenders that you struggle to live within your means and that you may be too reliant on the credit to get by.

Lower it for no reason

Okay, so this may seem a little contradictory to what we were saying earlier about lowering your limit. But if you’re having no problems with making your payments on time and in full, having a high credit limit is actually a positive thing.

Why? Because having a higher limit could help you lower that credit utilisation of yours. Not only that, but a high limit could signal to other lenders that you’ve been trusted to borrow more money, which is always a tick.