What Is a Credit Limit?

Learn how credit limits are determined, how they relate to your credit score and what can happen if you go over your limit


Credit cards can be useful tools. But they have their limits when it comes to spending. Specifically, credit limits. 

This article will detail how credit limits work, how your credit limit is set and what happens if you spend more than your credit limit.

How Do Credit Limits Work?

A credit limit is the maximum amount you can charge on a revolving credit account, such as a credit card. As you use your card, the amount of each purchase is subtracted from your credit limit. And the number you’re left with is known as your available credit.

How Do Credit Limits Relate to Available Balance?

It’s important to remember that your credit limit is not the same thing as your available balance. Purchases and other transactions, such as cash advances, will reduce your available balance. And so will any interest or fees you’re charged. But those things don’t change your credit limit.

As you make monthly payments on the account, your available credit goes back up by that amount—minus any finance or other charges.

What Determines Credit Limit?

Credit limits are set by lenders. And there are a variety of things that could factor into the decision. Companies might look at things like your credit score, your credit reports and your credit application. Here are some potential questions lenders may consider:

  • Payment history: Do you pay your bills, including monthly credit card bills, on time? 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?
  • Account history: How long have you had your current accounts? Have you applied for a bunch of new credit recently?
  • 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 bill?

If you are unhappy with your credit limit, you could ask for a credit limit increase. And in some cases, your lender could decide on its own to adjust your credit limit. That could mean an increase or a decrease, depending on the circumstances.

Does Credit Limit Affect Credit Utilization?

Your credit limit has an important relationship with credit utilization.  

That’s because credit utilization is the percentage of available credit you’re using, and it’s one factor that can affect your credit score. The Consumer Financial Protection Bureau (CFPB) recommends keeping credit utilization under 30%. The CFPB also says paying off your credit cards every month is the best way to keep that number low.

A higher credit limit may allow you to spend more while keeping your utilization low. But that freedom and flexibility comes with additional responsibility. Higher limits also make it easier to build debt quickly. And it’s important to remember that many factors can affect your credit score.

What Happens if You Go Over Your Credit Limit?

If you go over your credit limit, a few things could happen. The first is that your card could be declined when you try to use it.

You could also be charged a fee if you’re part of an over-the-limit coverage program, according to the Office of the Comptroller of the Currency. But that program is optional.

If you opt into the program, you could be charged a fee each billing cycle you go above your credit limit. Before you opt in, your credit card company must tell you how much the over-the-limit fees will be.

You can contact your credit card company to check your status. And if opted in by mistake, you can change your preference at any time. But you could still have to pay any fees that were already charged. And if your balance stays above your limit after you opt out, you may be charged additional fees too.

Keeping Track of Your Credit Limit

Credit cards are one tool that can be used to build credit or create financial flexibility—but only if you’re using them responsibly. And part of responsible credit use starts with knowing your credit limit and making on-time payments every month. 

But that’s just the start. Knowing how your credit card works can also help you use it responsibly. You can find out more about credit card basics by reading Capital One articles about the importance of credit, credit card interest and payment grace periods.


Learn more about Capital One’s response to COVID-19 and resources available to customers. For information about COVID-19, head over to the Centers for Disease Control and Prevention

Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

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