What’s a good credit card limit?

We break down what is considered a good credit card limit in the UK – and how you can go about achieving one.

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A credit limit is how much you are able to spend on a credit card. It is basically the maximum amount a lender is willing to lend you. So what is considered a good credit card limit here in the UK? Let’s take a look.

What is a credit limit?

Before taking a look at what is considered a ‘good’ limit, it helps to understand what a credit limit is.

Your credit limit will be set by your card provider. It is the maximum amount that they are prepared to lend to you on that card. Credit limits vary from person to person and from card to card.

There are several things that can influence the credit limit you are given:

  • Credit history – Your credit score and credit history are a big part of how a lender decides your credit limit. This is because they show how reliable you have been as a borrower in the past. If you have never borrowed before or have a history of missed payments, a lender is likely to be more cautious about lending to you.
  • Income – Affordability is also a big factor when it comes to borrowing. Your level of income after living costs will dictate how much you can borrow.
  • Existing credit commitments – The number of credit cards you already have will also affect your credit limit.
  • Lender’s own policy – At the end of the day, it is up to the card provider how much they want to lend, so credit limits can vary between lenders and different deals.

What is a good credit card limit?

It’s hard to put an exact figure on a ‘good’ credit card limit. In reality, a good credit card limit is one that strikes a balance between your borrowing needs and your financial ability to repay the debt.

While a ‘good’ credit card limit is subjective, we can take a look at is what the average credit card limit is in the UK.

At the moment, the average credit limit in the UK stands somewhere between £3,000 and £4,000. For those with a lower income or a poor credit history, it is more likely to be between £200 and £1,500. High earners could be looking at credit limits of £10,000 or more.

The key thing to remember with credit cards is that the money you spend is borrowed. So no matter how high your limit is, you will need to pay it back, preferably in full, each month in order to avoid costly interest charges.

Does my credit card limit affect my credit score?

The credit limit you are given on a card is dictated by your credit score. But in reverse, how much available credit you have and how you use it can affect your credit score. You can check your credit report at any of the three credit reference agencies: Experian, Equifax or Transunion.

Let’s take a look at available credit. Lenders tend to take into account the proportion of ‘revolving’ credit you use. So they’ll be interested in the credit cards you use regularly.

Whether or not you have a high credit limit on these cards will play differently with different lenders. Some may view high limits in a positive light, while others may think you are too reliant on borrowing.

What could affect your credit score is your credit utilisation ratio. This is how much of your credit limit you use at any one time. As a general rule of thumb, it is best to use no more than 30% of your available credit each month. So if your limit is £1,000, you should aim to use no more than £300 at any one time. If you are consistently nearing your credit limit, then you could be damaging your credit score.

Staying within your limit is very important. If you go over, not only will you face a £12 charge for doing so, but it will most likely affect your credit report. This could damage your future borrowing prospects.