The credit limit which you have on your card refers to the amount of money which the issuer has allowed you to spend each month. The maximum amount they are willing to risk depends on a number of things:
- Income – People with a larger income will be given a larger credit limit.
- Any assets to back up the cards – This is just an added security measure for the credit card issuer.
- Secured or unsecured card – If the card is unsecured then your credit limit will depend on your credit rating. However, secured cards simply need collateral to be able to provide a credit limit.
- The financial strength of the customer – This is only for unsecured cards. As above, the credit rating will determine the amount of credit that is provided.
- Your needs and requirements – Make sure that you only ask for a limit which you will feasibly be able to pay off, otherwise you will be left with a great deal of unmanageable debt. Also be aware of whether you think your credit limit's needs will rise in the near future, as you probably will not want to applying for a greater credit limit in the future.
- Trade and bank references – The issuer may wish to obtain references from your bank and may contact your employer and other bodies if the card will be used for business purposes.
- Agency credit reports - This is one of the main facets used to determine your credit limit. These reports will provide information for the issuer about your payment performance on past bills and credit rating.
- Financial statements – These will provide information about how much you generally spend each month and your balances in the recent past.
- Past performance – If you have owned any other credit cards, then the issuer may look at how you managed these.
