How Is Your Credit Limit Determined?

Your credit limit is determined based on your credit history, income, debts and other payment obligations. Your credit history is the information on your credit report, which serves as the basis for your credit score and indicates to credit card issuers whether you’re a responsible borrower. Your disposable income tells them how much additional credit you can comfortably afford.

What Is a Credit Limit?

A credit limit is the maximum amount of money you’re able to spend on a credit card. Once you’ve hit the credit limit, you’ll need to pay off at least part of the balance before you’re able to spend any more.

For example:

• If you have a $1,000 credit limit and then spend $500, you have $500 of available credit remaining.
• If you spend another $500, you’ll have hit your credit limit.
• Making a $200 payment would then free up $200 of available credit for more spending.

Credit cards also may have separate credit limits for cash advances and balance transfers that are part of, but lower than, the card’s overall credit limit. For example, you might have a credit limit of $1,000 but only $300 available for cash advances.

Although you can spend as much of your credit limit as you’d like, using more than 30% of it at a time is harmful to your credit score. However, your credit utilization, or the share of your credit limit that you use, doesn’t get reported to the credit bureaus until your statement is generated each month, so it’s your balance on the last day of your billing cycle that matters.

How Does a Credit Limit Work?

1. The issuer sets your limit: When you get approved for a credit card, the bank or credit union that issues the card will tell you the credit limit, and that limit will usually be listed in your online account and on your monthly statements as well. Cards that have no preset spending limit are the exception.
2. You make purchases: When you purchase things with your credit card, or make other types of transactions such as cash advances or balance transfers, the amount of each transaction gets subtracted from your available credit.
3. You can spend up to your credit limit. Once you’ve hit your credit limit, you’ve “maxed out” your card and can’t spend any more until you pay off some of what you owe.
4. You make payments. Regardless of whether you only spend a little or you max out your card, you’ll have to make monthly payments to your credit card company. The amount of money you pay frees up an equivalent amount of your available credit.
5. You may owe interest. If you carry a balance from one billing period to the next, interest will start accruing on that balance and on new purchases that you make on a daily basis. That interest reduces the amount of available credit you have as it’s added to your balance.

You can learn more with WalletHub’s in-depth credit limit guide.

How Income Affects Credit Limits

The golden rule of credit card underwriting is to make sure the borrower’s income and assets will enable them to pay for what they spend, given their existing debt obligations and other liabilities. Creditors therefore base your credit limit on the minimum monthly payment that you can comfortably afford to pay given your disposable income.

Example Credit Limit Based on Disposable Income

Disposable Income: $200/month
Minimum Payment: 2% of your balance
Estimated Credit Limit: $10,000 ($10,000 x 2% = $200)

We use the term “disposable income” to mean your income after taxes and accounting for essential monthly expenses. After all, having a high income is no good if every dollar is already spoken for. One way that credit card issuers help gauge your disposable income is by asking for your monthly rent or mortgage payment on credit card applications, as that’s generally people’s biggest expense each month.

Your disposable income can vary a lot from month to month, though, so it might be easier to look at gross income instead. The following table will give you a more general idea of what type of credit limit you can expect to receive based on your gross income level and credit score.

Credit Card Limits by Income Percentile

Sources: Credit limit data from the Federal Reserve Bank of Philadelphia and income data from the U.S. Bureau of Labor Statistics (2025)

Naturally, if your income falls into a lower percentile, you can probably expect to get a credit limit below $4,000. But income isn’t the only factor that plays a big role in determining your credit limit. You can learn more about the impact of your credit history on your credit limit below.

How Your Credit History Impacts Your Credit Limit

Your credit history – the information in your major credit reports – reflects how financially responsible you are and how you’ve managed your credit accounts over the past 10 years. The more dependable you’ve proven yourself to be in satisfying financial agreements, the more credit you’ll be eligible to receive moving forward (assuming your income can sustain it).

As you can see from the table below, the median credit limit on a card at the time the account is opened varies widely based on the applicant’s credit score.

Source: Federal Reserve Bank of Philadelphia (2025)

Better credit histories clearly lead to dramatically higher credit limits. Major things that lenders look for in your credit history include:

• Existing debt: Your credit reports show how much you owe on credit cards, mortgages, car loans, student loans, etc. How much you already owe will naturally play into how much the issuer is willing to let you borrow on a new card.
• Credit utilization: Credit utilization is tied to existing debt, but it’s a little different. It’s the percentage of your credit limit that you’ve used and not paid back yet, both on each individual line of credit and overall. The lower your credit utilization is, the larger any new credit limit is likely to be, as it shows that you’re not desperate for credit and can handle credit lines responsibly.
• Payment history: If you’ve consistently made on-time payments in the past, that demonstrates you can manage your credit well and will entice issuers to give you higher credit limits. That’s especially true if you pay your balance in full each month, as that assures issuers that you only spend what you can afford.
• Recent credit inquiries: If credit card companies see that you’ve applied for credit with multiple other lenders recently, they’ll be less likely to give you a high credit limit because they anticipate that you’ll accrue other debts.

To see how changes to your credit history can affect your credit score, check out WalletHub’s free credit score simulator. Getting a higher credit limit is one major factor that can boost your credit score.

The Importance of Profitability

At the end of the day, it’s all about the bottom line for banks and other lenders. They determine the credit lines and products that you’re eligible for based on how much they stand to make from the relationship. Your credit history and disposable income have a lot to do with how they gauge potential profitability, but those aren’t the only metrics that they consider.

Most creditors also use consumer analytics to compare your applicant profile to historical data about how other applicants with similar financial habits and earnings expectations have fared. This enables them to gauge things like:

• Fee Potential: If you have a history of regularly incurring (and paying) service charges, interest, and other fees, this may appeal to creditors with dollar signs in their eyes.
• Attrition: Financial institutions are also able to estimate the length of time they can expect to have you as a customer. They may be more inclined to offer you a higher credit limit if you’re typically brand-loyal and have a preference for handling many types of financial transactions through a single bank.
• Likelihood of Recovery: Creditors are not only able to gauge how likely you are to experience major financial difficulties in the future, but also the chances that they’ll be able to recoup the money that you owe them should such difficulties arise.

Transparent vs. Shadow Limits

While most credit cards will clearly disclose the credit line that is available to you, it’s important to understand that’s not always the case. Certain cards have a feature known as No Preset Spending Limit (NPSL), which means their spending limits change on a monthly basis in light of the economic landscape as well as changes in your spending and payment habits.

Many people mistake NPSL with having unlimited credit. All credit cards have spending limits, though. The only differences between a card with a transparent credit limit and one with NPSL is that you won’t know what your limit is, and you may unnecessarily incur credit score damage based on how NPSL limits are reported to the credit bureaus.

Your Credit Limit Can Always Change

Credit card companies regularly review accounts in order to determine eligibility for credit limit increases and decreases. If you believe you are eligible for an increase, you may want to simply ask for one.

Keep in mind that certain creditors may be receptive to this, while others will view it as a sign that you are desperate for money and will therefore hold it against you. Asking for a higher limit often results in a hard credit inquiry, too. That’s why you should typically only ask for a credit limit increase if the following three situations apply:

• You are not maxing out your current credit limit.
• You’ve made at least six consecutive on-time payments since you opened the card or since your last credit limit increase.
• You don’t need your credit score in pristine shape, like if you’re about to apply for a mortgage or a car loan.

To ask for a credit limit increase, just call the number on the back of your card and follow the prompts to speak to customer service. It’s worth noting that your issuer will also periodically evaluate your account and may automatically increase your limit from time to time without you even asking.

You can learn more about how to increase your credit limit here on WalletHub.