hamburger
×
Digit General Insurance Logo
Powered By Digit
mobile-img

Check Credit Score for FREE

Instant in 2 Mins. No Impact on Credit Score

desktop-img

Why Credit Card Limit Matters & Tips to Increase the Limit

What is a Credit Card Limit?

How is Credit Card Limit Determined?

What is the Difference Between the Total Credit Limit and the Available Credit Limit?

Understanding the difference between the total credit limit and the available credit limit is essential for responsible credit card management, the differences are as follows:

Criteria

Total Credit Limit

Available Credit Limit

Definition

The highest possible borrowing or spending limit is accessible to a credit card holder.

The remaining amount can be utilised after deducting the current outstanding balance.

Calculation

Credit limits on cards are determined by the issuer based on credit, income, and financial history.

Total credit limit minus the current outstanding balance and any pending transactions gives the available credit limit.

Significance

Represents the maximum allowed spending or borrowing on a credit card.

Indicates the actual amount available for new purchases, cash advances, or balance transfers.

Implications for Debt

Does not consider the current balance or how much of the credit limit has already been utilised.

Reflects the remaining credit after accounting for current spending and outstanding balances.

Monitoring Usage

Useful for understanding the maximum borrowing and spending capacity.

Crucial for preventing over-limit fees and managing spending within a budget.

Overspending Risk

Does not provide real-time information on available funds, and a higher total limit might increase the risk of overspending.

Helps in avoiding exceeding the credit limit and potential fees associated with over-limit transactions.

Credit Utilisation

Total Credit limit is not directly linked to credit utilisation ratios but can influence the ratios.

Directly impacts utilisation ratios, as it considers the relationship between outstanding balances and credit limit.

How to Increase Credit Card Limit?

FAQs on Credit Card Limit