Credit card limits explained

Credit card limits explained
Stacey Corrin

⏱Last Updated on

Credit card limit

In the UK, there are 59 million credit card accounts and counting. Yet despite their prevalence and the fact that this form of credit has been around for more than five decades, credit card problems remain common. In September 2017 alone, UK banks wrote off a staggering £361 million in credit card debt, and the country’s overall debt shows no sign of slowing – together we owed a startling £16 billion, as of October 2017.

With these stark figures in mind, the first founding step to avoiding credit card issues is understanding your limit – which we explain in this guide.

Your credit card limit – The basics

Credit card limit

What is a credit limit?

A credit limit on a credit card is a figure in pounds that you are able to spend up to. This is the maximum line of credit that the card issuer is willing to lend up to. Over the course of one billing cycle (e.g. one month), you are allowed to spend anything up to the credit limit of your card. Once your monthly bill arrives, you will have to make at least the minimum payment (usually 3% or £5 – whichever is greater), within the required time period (your credit card payment is generally due by 5 pm on the due date shown on your credit card statement).

Example… Your credit limit is £1000, you spend £250, leaving £750 available. Once the billing cycling ends, you receive a credit card statement with a minimum required repayment of £7.50. Because you pay the entire £250, you avoid paying any interest whatsoever. 

What happens if you don’t clear your balance each month?

Credit card limit

Example…

  • Your credit limit is £800.
  • You buy a £100 coat.
  • You make a £30 credit card repayment.
  • £700 revolves onto next month’s statement.
  • A £4 finance fee is added to the balance (assuming the interest rate is 20% APR).
  • The total amount you can charge is £726 (£800 – £100 + £30 – £4 = £726).

How is a credit limit set?

Credit card limit

Your credit limit will be based on the information you provide, your income and your credit history. If you have a low income, a poor credit history or high level of debt, you may be offered an initial credit limit that is relatively low.

Staying within your credit card limit is essential for:

  • Avoiding fees
  • Ensuring your credit card use does not harm your credit score
  • Being approved for future credit limit increases

Key question: How much will your credit limit be?

Unfortunately, there is no way of knowing how large a limit you may qualify for without applying. That said, you can gain an idea as to whether you will be approved or rejected, by using an eligibility tool, if one is available. 

How to increase credit card limit?

Credit card limit

The only way to increase your credit limit is to be a responsible borrower. This means that you must…

  • Regularly use your credit card
  • Ideally, repay the balance in full each month
  • Alternatively, you can make smaller, more affordable payments, however, these should be more the minimum repayment
  • Remaining strictly within your limit
  • Regularly reviewing your credit history, via a tool such as Experian, Noddle or ClearScore – this can help you pick up on anything that may be harming your credit history

High limit credit cards – How do they work?

High limit credit cards work in exactly the same way as a regular credit card. However, the two defining differences may be the higher limit, as well as a potentially lower than average APR (those who qualify for high interest credit cards typically have a solid credit history, and can thereby access better interest rates).

What is the Aqua credit card minimum credit limit?

Credit card limit

The Aqua credit card is designed to help you rebuild your credit. As such it offers a limit of between £250 and £1200.

What is the Argos card credit limit?

Credit card limit

Argos does not advertise either the minimum or maximum credit card limit they offer. What’s more, they are amongst a select group of retail lenders to provide differing credit plans. For example, the Argos card credit limit could be used for larger purchases that are repaid between 3 to 12 months, with smaller purchases working in the same way as a standard credit card.

Stacey Corrin

Stacey Corrin

Stacey can be described as a serial blogger having created and maintained many successful blogs on topics ranging from social media and marketing to interior design and self-improvement. Along the way, she developed a great love of writing and graphic design, which caught the attention of the Cash Lady team. Now, Stacey uses her expertise on blogging and Social Media to manage Cash Lady's blog, helping to develop and polish many of the money saving articles and guides you'll find here. She's also Cash Lady's voice on Social Media and is always open for a chat on your favourite platform. Find out more about Stacey on Google+
Stacey Corrin

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