When it comes to credit cards, “good” can mean a lot of things, but today, we’re talking credit limits. You know, the magical number that determines how much you can spend before your card gives you the cold shoulder. But what exactly is a good credit limit? Is it enough to cover a trip to Bora Bora or just a night out?
A good credit limit varies based on individual financial situations, but to maintain a healthy credit score, it should be enough to cover expenses without exceeding 30% of your available credit. In other words, you want your credit limit to be almost four times the most you plan to spend on the card (before paying it off).
Having a good credit limit on your credit cards can make life much easier. With a higher limit you have more flexibility to purchase larger items or handle financial emergencies without maxing out your cards. But what exactly constitutes a “good” credit limit? The answer depends on your financial situation and credit profile.
In this comprehensive guide, we’ll explore what makes a credit limit “good,” typical limits across different card types and age groups, why your limit matters, and how to increase it. Read on for tips to find your credit limit sweet spot.
What Is a Credit Limit?
Your credit limit is the maximum amount you can borrow on a credit card before needing to pay down the balance It’s essentially a credit ceiling set by your card issuer based on your creditworthiness and income
Exceeding your credit limit can result in declined transactions or penalty fees. It’s wise to pay off balances each month and avoid carrying large balances close to your limit.
Average Credit Card Limits in 2023
Average credit limits vary widely based on age, credit history, and other factors. Here are the current averages according to Experian data:
- Gen Z (ages 18-24): $12,899
- Millennials (ages 25-40): $27,533
- Gen X (ages 41-56): $38,665
- Baby Boomers (ages 57-75): $41,906
- Silent Generation (age 76+): $32,812
As you might expect, more established generations with longer credit histories have higher limits on average.
Typical Limits by Credit Card Type
Your credit card type also impacts your potential credit limit:
- Student cards: $500 – $1,000
- Cash back cards: $1,500 – $2,500
- Travel rewards cards: $5,000 – $10,000
- Premium rewards cards: $10,000+
- Secured cards: $200 – $1,000 (equal to deposit)
Premium rewards cards tend to offer higher limits, while secured cards aimed at building credit have lower limits.
What Is Considered a Good Credit Limit?
A good credit limit depends on your personal finances and credit profile. Here are some guidelines:
- For a first credit card, $500 – $1,500 is decent.
- For students and young adults, $2,000 – $5,000 is considered good.
- For established adults, a limit equal to 20%-30% of your income is ideal.
- To maintain a solid credit score, keep utilization under 30% of your limit.
The higher your income and credit score, the higher limit you can likely qualify for. Aim for a limit that provides flexibility without tempting overspending.
Why Your Credit Limit Matters
Your credit limit impacts your finances in a few key ways:
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Credit utilization – A higher limit means lower utilization, which can raise your credit score.
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Large purchases – A good limit enables you to use a card for a large expense without maxing it out.
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Emergencies – More available credit gives you a cushion for unexpected costs.
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Financial flexibility – Room to grow your limit over time provides more buying power.
How Issuers Determine Your Credit Limit
When you apply for a new card, the issuer will review:
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Your credit reports and scores
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Income
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Existing debts
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Credit history length
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Utilization on current cards
This gives them an idea of your creditworthiness and repayment ability. They want to see you’ve managed credit responsibly.
Tips to Increase Your Credit Limit
If you need a higher limit, here are some tips:
- Make payments on time consistently
- Keep credit utilization low
- Build your credit history over time
- Ask for periodic limit increases after 6+ months
- Update your income with card issuers
- Maintain excellent credit scores
Avoid applying for multiple limit increases within a short period, as this can raise red flags.
Handling High Credit Limits Responsibly
A higher credit limit empowers you only if used wisely. Here are some tips:
- Stick to a reasonable budget
- Track spending diligently
- Pay balances in full each month
- Keep utilization below 30% across all cards
- Set up alerts for large transactions
- Review statements regularly for errors
Let your limit work for you, not against you. Use it strategically to unlock the many perks that come with good credit.
The Takeaway
A good credit limit gives you financial breathing room while keeping your utilization in check. For most people, a limit in the range of 20%-30% of their income is ideal. Improving your credit score and history over time can help you qualify for incrementally higher limits. But restrain yourself from drastically exceeding your limit just because you can. The keys are discipline and responsible money management.
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Why should you stay away from borrowing up to your credit limit?
Maxing out your card can negatively impact your credit score and limit your financial flexibility.
How much credit should I use?
Aim to use less than 30% of your available credit to maintain a healthy credit score.
How to Get a HUGE Credit Limit Increase EVERYTIME on Your Capital One Credit Cards (NO HARD PULL)
FAQ
Is $20,000 a high credit limit?
Yes, $20,000 is a high credit card limit. Generally, a high credit card limit is considered to be $5,000 or more, and you will likely need good or excellent credit, along with a solid income, to get a limit of $20,000 or higher.
What is a reasonable credit card limit?
It boils down to your financial habits and income. A good rule of thumb is to aim for a credit limit that’s about 20-30% of your annual income. For example, if you make $50,000 a year, a good credit limit might be around $10,000 to $15,000.
What credit limit can I get with a 750 credit score?
What is a credit limit?
A credit limit is the maximum amount of money a lender will allow you to spend on a credit card or a line of credit. Knowing your maximum, however, does not mean it’s a good idea to reach it. In fact, learning how to manage your limit responsibly now will likely improve how much you can borrow down the road for such things as a home or a car.
What is a good credit limit?
For someone with no credit, for example, a $500 credit limit is good because most beginner credit cards start off with lower limits. But for very experienced borrowers with a lot of disposable income, a good limit is much higher. Note: A good credit limit is slightly higher than the average for each age range, based on 2020 Experian data.
Do credit cards have credit limits?
Credit cards have credit limits, or maximums that dictate how much a cardholder can spend on the card before needing to pay the balance. According to Experian, the average credit limit for Americans across all credit cards was $29,855 as of the third quarter of 2023.
Which credit card has the highest credit limit?
The high limit allows you to concentrate your attention and money on paying down all your credit card debt using a single balance transfer card. Research indicates any card from Bank of America offers the highest credit limit — $99,900 — among balance transfer cards.
Is a $5,000 credit card limit good?
A $5,000 credit limit is good if you have fair, limited or bad credit, as cards in those categories have low minimum limits. The average credit card limit overall is around $13,000, but you typically need above-average credit, a high income and little to no existing debt to get a limit that high.
What is a secured credit card credit limit?
Secured card credit limits generally range from $300 to $5,000, depending upon the issuer’s practices. Which Credit Card Offers the Highest Credit Limit? Of the cards reviewed in this article, the Chase travel card twins, Chase Sapphire Reserve® and Chase Sapphire Preferred® Card, are purported to have credit limits as high as $500,000.