What is a good credit limit?

A credit limit is the maximum amount you can spend with your credit card. There’s no one credit limit that’s considered a good one. Instead, it’s about what works for you.

What you’ll learn:

• There’s no universally good credit limit.

• Credit card issuers consider income, credit scores and more when determining credit limits.

• You can request a credit limit increase, or your credit card issuer might offer you one.

• You can improve your chances of getting a credit limit increase by demonstrating responsible credit use, like keeping your credit utilization low.

There’s no ideal credit limit for everyone. Instead, it’s about what’s right for you. According to credit-scoring bureau Experian®, a good credit limit should cover your spending and help you keep your credit utilization low. The Consumer Financial Protection Bureau (CFPB) suggests keeping your utilization below 30%. For example, that means using less than $3,000 of a $10,000 limit.

Credit limits are based on factors like your income and credit profile, so they vary from person to person. But according to Bankrate, credit limits for a single credit card typically range from $500 to $10,000.

Credit card issuers set credit limits based on multiple factors. They might include:

• Debt-to-income (DTI) ratio: Your DTI is calculated by dividing your total monthly debt payments by your gross monthly income. It shows your earnings before taxes and deductions are taken out. 

• Credit scores: Payment history, recent credit applications, credit utilization ratio, credit mix and age of credit all affect credit scores. Generally, credit card issuers grant higher credit limits to people with higher credit scores.

There are no guarantees that a credit card issuer will increase your credit limit. But there’s no harm in asking. And sometimes issuers even offer increases themselves. Here are some steps you can take that might help you qualify:

• Think about timing: Gotten a raise recently? Boosted your credit scores since you got your credit card? Those changes might reflect well on your creditworthiness and DTI ratio. Just opened the account or recently requested or received a credit limit increase? New accounts or credit limits that have been recently adjusted may not be approved for increases. 

• Use your card responsibly: Making your monthly payments on time and maintaining a low credit utilization ratio are good for your credit scores, and these could demonstrate to your issuer that you’re ready for a higher credit limit.

Ideas about managing credit responsibly apply to successfully managing credit limits. Generally, if you’re making payments on time every month and not maxing out your card, you’re on the right track. Here are four ideas to help you do those things: 

1. Set spending alerts: Issuers like Capital One offer all kinds of account alerts. If you set spending thresholds, your issuer could notify you when your balance nears your credit limit or your available credit is low. 

2. Automate your payments: To avoid missing due dates, you could set up automatic payments. You can avoid or minimize interest charges by paying your full statement balance each month. If you prefer to manage your bills yourself, payment alerts are another option.

3. Review your monthly statements: Regularly checking your credit card statements is a great way to keep your spending top of mind. It can help you spot transactions you don’t recognize that could be a result of fraud. Instant purchase notifications can tell you whenever a purchase is made with your card.

4. Monitor your credit: Knowing your credit scores and what’s in your credit reports can give you an idea of what your card issuer might review if you ask for an increase. You can use CreditWise from Capital One to access your TransUnion® credit report and FICO® Score 8 credit score anytime for free. You can also visit AnnualCreditReport.com to get copies of your Experian and Equifax credit reports.

Credit limits are based on factors like income, credit history and activity, and debt. The right limit for you depends on things like your income, spending habits and your ability to manage payments. 

If you’re looking for a new credit card, you could check if you’ll be approved with 100% certainty before you accept a Capital One card offer.