Setting credit card spending limits

When you get a new credit card, it comes with a credit limit set by the issuer. You can borrow up to that limit, known as maxing out the card, if you want. Or you could independently set a lower personal spending limit. That could offer all sorts of benefits, from budgeting and saving to healthier credit scores.

What you’ll learn:

• Setting a personal credit card spending limit can help you stick to your budget and better manage everyday expenses.

• A self-imposed spending limit can help keep your credit utilization lower, which may support healthy credit scores.

• Mobile app alerts and account tools can make it easier to monitor your spending and stay on track.

Here’s a closer look at the difference between a credit limit and a spending limit. 

• Credit limit: The lender sets your credit card’s credit limit. Exceeding the limit can result in declined transactions, fees or higher interest rates. Capital One doesn’t charge over-the-limit fees on its U.S.-issued credit cards. View important rates and disclosures.

• Spending limit: You, the borrower, can decide where to cap your spending as a budgeting tool. Of course, this can only help if you stick to it.

Setting a spending limit on your credit card can help you reduce the risk of maxing out your card, stay within your budget and avoid unnecessary charges or fees.

Setting a spending cap can help you keep your credit utilization ratio low. That’s the percentage of available credit you’re using across all your revolving credit accounts. Credit utilization is an important factor in the calculation of your credit scores. The Consumer Financial Protection Bureau (CFPB) recommends keeping your ratio below 30%.

A credit card spending limit can make budgeting simple. For example, a single monthly cap covering all nonessential expenses—things like clothes, entertainment and takeout—could help you stay on budget while still giving you flexibility over how much you spend in each category.

A spending limit can help you avoid the effects of maxing out or exceeding your credit limit. Depending on the card issuer, these can include having transactions declined or penalty interest rates triggered. Capital One cardholders are never charged over-the-limit fees. View important terms and disclosures.

If you’re a Capital One cardholder, there are a number of tools, protections and alerts you can take advantage of to help you keep track of your spending. You can set alerts that let you know whether your card is declined or your balance has fallen below a set amount. You can view lists of your recurring payments, get due date reminders or block subscription charges. Eligible cardholders may even be able to exceed their credit limits. If your account has access, you can check in real time whether your purchase could be approved.

All you need to do is add the Capital One Mobile app to your phone or sign in to your account online.

A credit card spending limit isn’t the same as a credit limit set by the card issuer. It’s a cap you set yourself. 

Capital One offers a number of free digital tools to its customers that can help track spending and expenses. If you’re ready to find the right credit card for you, you can see if you’ll be approved for a Capital One card with 100% certainty and no impact on your credit scores.