Which Credit Card Offers the Highest Credit Limit?

One of the most important things to know about your credit card is your credit limit. Your credit limit is the maximum balance that you are allowed to have on your card at any given time. The size of your credit limit directly affects your purchasing power, as the larger the limit, the more you can purchase. 

How is the credit limit determined?

How the credit limit is set depends on the credit card. Some credit cards, for example, have a specific credit limit that every approved cardholder receives, regardless of other factors like creditworthiness. Other credit cards have a credit limit rate and approved cardholders are assigned a credit limit within that range, based on a range of factors. Though credit card issuers do not post their credit limits publicly, the way they make their determinations is not random. A variety of components are factored when establishing a credit limit, including:

• Your Income. The amount of money you make generally affects the amount you can afford to pay and therefore with a higher income, you will generally be approved for a card with a higher credit limit.
• Your Debt-To-Income Ratio. Credit card issuers are able to estimate your debt-to-income ratio, which will factor into your credit limit. For example, a person with a high income, but also a high level of debt, could receive a lower credit limit
• Your Credit History. Your existing credit score, as well as how you have handled credit limits on your other credit cards will not only affect your approval chances for a new credit card, but will also affect the credit limit you will be approved for.
• Limits on Other Credit Cards. Credit card issuers will also consider credit limits on any other credit cards that you may have. For example, if you have high credit limits on other credit cards, you will have a better chance of being approved for a high credit limit on a new credit card. Conversely, if your credit limit on existing cards is less than $1000, it is very unlikely that you will be approved for a $5,000 credit limit.
• Co-Applicant Information. If you are applying for a credit card jointly with another person, issuers will consider both of your incomes and the financial information listed above when setting your credit limit

It is important to note that your credit limit may not stay the same the entire time you have the credit card. You can be approved for credit limit increases if you use your credit card wisely and make your monthly payments on time. Similarly, your credit limit can be lowered if you are not staying on top of your finances and your debt increases to a level that your credit card issuer considers to be higher risk. 

Notable exceptions

While most credit cards decide your credit limit, secured credit cards work differently. A secured credit card is nearly identical to a traditional or unsecured credit card in that you can incur interest charges and you may even earn rewards or other benefits, however, they differ in that secured credit cards require you to make a refundable security deposit, the amount of which becomes your credit limit. 

Other exceptions are charge cards or credit cards with no preset spending limit. These cards do not have a firm credit limit, but instead come with a soft limit that can change depending on your income, your credit history, and purchasing habits.

How much of your credit limit can and should you use?

As one would think, you can make purchases all the way up to your credit limit. However, if you do exceed this limit, you may be faced with other fees. Therefore, make sure to closely examine your credit card agreement to see whether or not your card issuer imposes a penalty. 

More importantly, exceeding your credit limit, or even getting too close, can have a sizable impact on your credit score. Both your credit limit and your credit card balance are reported to credit bureaus each month, and this information is used to calculate your credit utilization. Credit utilization measures the amount of your credit limit that is being used and accounts for 30% of your credit score. As a result, the higher your credit utilization, the more your credit score can be hurt. Experts typically recommend that you keep your credit card balances within 10-30% of your credit limit in order to maximize your credit score.

Cards with the highest credit limits

High limit credit cards are usually only approved for those with good or excellent credit. If you are looking for a credit card with a high credit limit, here are some of the best choices:

Conclusion

It is very important to manage your credit limit to stay out of debt, as well as maintain and build a good credit score. Although credit cards can be a great way to make purchases and earn rewards, they can also get you in a lot of trouble. As always, make sure that you set up and follow a budget, and use your credit cards responsibly in order to stay on top of your finances.