What is a credit limit?

A credit limit is the maximum amount of credit an issuer authorizes a borrower to use on a credit card or line of credit. Factors like income and payment history can help issuers determine credit limits. Exceeding a credit limit may result in penalties, fees or even canceled credit cards and lines of credit.

Learn how credit limits work, how they’re set by card issuers and what could happen if you exceed your credit card’s limit.

What you’ll learn:

• A credit limit is the amount of credit a lender grants on a credit card or other type of credit account.

• Issuers may determine credit limits by examining credit history and other financial information.

• Credit limits can affect credit scores because of their relationship to credit utilization ratios.

• Capital One doesn’t charge cardholders fees for exceeding their credit limits. View important rates and disclosures.

A credit limit is the maximum amount of money a cardholder can charge to a credit card account. A credit card is maxed out when its limit is met or exceeded. Credit card limits can vary by issuer and cardholder.

While related, available credit and credit limits aren’t the same:

• Credit limit: The maximum amount of credit an issuer allows a borrower to use

• Available credit: As a card is used, the remaining amount a cardholder can charge to the card

Balance transfers, cash advances, fees and interest charges can reduce your available credit, but the credit limit remains constant.

Lenders typically determine your credit limit by reviewing information from credit reports and considering other factors, which might include:

• Payment history: Do you pay your bills on time, including monthly credit card bills? Have you ever filed for bankruptcy or had a debt sent to collections?

• Current accounts: How many accounts do you have open? And what kinds of loans do you have open? Do you sustain high balances across your existing credit cards?

• Account history: How long have you had your current accounts? Have you applied for a lot of new credit recently?

• Credit card debt: How much do you owe? How much credit are you using? How much do you have available?

• Income: Do you make enough money to cover your monthly bills?

• Debt-to-income (DTI) ratio: What do your monthly debt payments look like compared to your monthly gross income?

Yes, your credit limits can change. In some cases, lenders proactively adjust credit limits. That could mean an increase or a decrease, depending on the circumstances.

If you’ve been using your credit card responsibly and think you could benefit from a higher credit limit, you can request a credit limit increase. Depending on the issuer, you might do this online, through an app or by phone. Whether your request gets approved also depends on the issuer.

Your credit limit plays a role in your credit utilization ratio. That’s the percentage of available credit you’re using across revolving accounts. Credit utilization is one factor that can affect your credit scores.

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.

Spending more than your credit limit may result in declined transactions, fees or higher interest rates. 

An issuer can only charge a fee if you participate in its over-the-limit coverage program. But they may still approve or decline transactions that exceed your credit limit, regardless of your enrollment status. If you opted into an over-the-limit coverage program, lenders can charge one fee per billing cycle and no more than three fees for the same transaction.

Capital One usually doesn’t charge over-the-limit fees. View important rates and disclosures. And eligible cardholders can sign in online to check whether their purchases might be approved if they exceed their credit limit. You can also disable the ability to spend over your credit limit in your over-limit preferences.

Your credit limit is the maximum amount you can borrow on a credit card or line of credit. Lenders typically determine credit limits based on factors like your credit and payment history. Going over your credit limit may result in fees or other consequences. But some credit card issuers, like Capital One, generally don’t charge over-the-limit penalties. View important rates and disclosures.

If you’re looking for a new credit card, Capital One can help. 

• See if you’re pre-approved for credit cards without harming your credit scores. 

• If you’re looking to build your credit with responsible use, explore cards for people with fair credit. 

• Earn cash back on every purchase, every day, with a cash back rewards card. 

• Monitor your credit report and score with CreditWise from Capital One. It’s free, you don’t have to be a Capital One cardholder to access it and using it won’t hurt your credit scores.