What Determines the Credit Limit on Credit Cards?

You have some control over your credit card limits over time.

You have some control over your credit card limits over time.

You’ve finally reached that point where you no longer have to be an “additional cardholder” on your parents’ credit-card account to get your own credit card -- but you may find that your new credit line is barely enough for a few expensive dinners and an oil change. Don’t despair, as this doesn’t have to be permanent.

Pay Your Credit Card Bill on Time

This may seem obvious, but particularly for new credit accounts, the bank that gave you the credit card may be sensitive to missteps early in your courtship. Missing one payment after 30 days may be more worrisome than missing one payment after six years, as they have no history with you to know whether this is just a glitch or a habit. And pay all of your balance, or at least more than the minimum required.

Pay All of Your Bills on Time

When a bank considers giving you a credit card, they want to know if you're going to pay your debt. If they have no history with you, they’ll “ask” your references: the other creditors on your credit report. Well, they won’t really ask them, but they will review your past relationships and how conscientious you’ve been. The better you’ve been in keeping your debt promises, the more likely you are to get a higher credit limit.

Keep Your Balance Below Your Allowed Credit Limit

Many companies pay attention to how much of your available credit you are using each month, and generally, less is better. If you are given a limit of $3,000 and you routinely run up your card to $2,000 each month, your credit score will likely be lower than if you only charge $500 a month. So if you can get your credit limit raised, and keep your credit card charges the same, you’re in good shape.

Get a Secured Credit Card

Let’s say you have no debt -- not even student loans. Not only would that be an anomaly, but an enviable one -- except when you apply for a credit card. You are a complete unknown to the bank because you have no credit history. Ask them if they offer a secured credit card. This is where you open a savings account and make a deposit, essentially “securing” a credit line with the amount in your account. At first, your limit might equal the deposit amount, but over time your limit will exceed the savings account balance. Eventually, you’ll graduate from the secured requirement.

About the Author

Based in Central Texas, Karen S. Johnson is a marketing professional with more than 30 years' experience and specializes in business and equestrian topics. Her articles have appeared in several trade and business publications such as the Houston Chronicle. Johnson also co-authored a series of communications publications for the U.S. Agency for International Development. She holds a Bachelor of Science in speech from UT-Austin.

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