What is a Credit Card Limit? & How To Manage It

What is a Credit Limit?

It's the purchase limit on your card

The credit card limit is the maximum amount of money you can spend using your credit card. It gets extended by the lender and contractually agreed upon by the credit cardholder. The card issuer sets this limit based on its clients' credit scores and credit reports.

Your credit history influences your credit limit

Credit card limits are subject to a set of mandatory qualifications that the issuer requires of its clients. Your credit card limit is set at a lower amount if your credit history indicates that you are a high-risk borrower. Similarly, a low-risk borrower with a good credit rating can get an extension to a higher credit limit.

When you apply for a credit card, the following are the details to look at:

• Personal income
  
  
• KYC details
  
  
• Security vis-à-vis employment status
  
  
• Current debt
  
  
• Current credit in your name
  
  
• History of loan repayments

This information combined with your credit score determines your credit card limit.  If you are unable to meet the required criteria to qualify for a particular Amex Credit Card, alternative options of Credit Cards and Credit limits can be open for discussion.

Total credit limit and available credit limit are different

The total credit limit is the absolute maximum amount that you can spend using your credit card. Available credit limit refers to the current balance available on your credit card after your monthly expenditure.

For example, if you have a credit card with a limit of ₹80,000,  then this is the amount which is your spending limit on the card. 

Future spending/purchases should not exceed this amount. Failure to do so will take you over your credit limit and bring with it an additional penalty and fee. It could also negatively impact your credit rating. When you make your repayments, your available credit limit is automatically adjusted.

How do I check my credit limit? 

Knowing your available credit limit can help you plan your purchases accordingly and help you maintain a decent credit score. You can check your total credit limit on your monthly credit card statement. You can also check it online by logging into your credit card account or set up an alert on the American Express App that sends you a notification when you are about to reach your credit limit. 

How do I increase my credit limit? 

All requests for a credit limit increase gets reviewed on a case-by-case basis. Factors like payment history, personal income, and credit score are considered before granting a credit limit raise.

A higher credit limit improves your purchase power flexibility and boosts your credit score. You are more likely to succeed in getting a credit limit increase if you make repayments on time and have a sincere credit history. You may also consider getting a credit card with higher credit limit. And this is easier than getting the credit limit increase on an existing card.. 

Can I spend more than my credit limit? 

The safest way to spend beyond your credit limit is by first asking us for a credit limit increase. Making a prior arrangement with Amex will allow you to spend without having to worry about penalties and other
unfavourable consequences.

Over-limit fee

Over-limit transactions come with caveats. Amex charges a fee if  you are going to overspend on your Credit Card. Also, you can only exceed your Credit limit till a pre-set amount. If your current available Credit Card balance has exceeded your total Credit limit, all further transactions get declined.

Overspending without informing

If you overspend without notifying us, you can get penalized for the transaction, or your Card gets declined at the merchant site. If you are a repeat offender, your Card limit might also be decreased or even cancelled by some issuers.

Your credit score might get affected

Over-limit expenditure automatically increases your credit utilization rate, which reflects poorly on your credit score. To avoid this, you should always try to pay the over-limit dues as soon as possible. Please note that spending above your limit may make it difficult for you to apply for a new credit card in the future.

Is it a bad thing to have a low credit limit

Credit card limits depend on your financial position. Having a credit limit is designed to help you avoid getting into debt. By using a credit card frequently and by making regular repayments, you improve your credit score. A good credit score ensures higher limits on future credit card applications.

Cards without a credit limit

If you're looking for a card that does not have a credit limit, then you may want to consider a Charge Card. These are Cards with no pre-set spending limits*, and you have to repay your balance in full by the due date to avoid incurring fees.

Tips on Staying within your Credit Limit

Know your credit limit

Knowing your credit limit is the first step to making sure your balance stays under control. You can reduce the risk of going over your limit by making regular payments.

Pay off as much as you can

Paying more than the minimum amount required will reduce the amount of interest you’ll be charged and will help you pay your balance off faster.

Make use of our digital tools 

You can log in to your online Account or download the Amex Mobile App to keep track of your spending and more while you’re on the go.

Useful terms

Repayments

When your statement arrives, you will have a choice of repayment options. You can pay off the entire Credit Card bill on, or before, the statement due date – in which case you’ll avoid paying more interest.

Minimum Repayments

You can choose to spread your Credit Card repayments out over time by paying at least the minimum monthly repayment amount. Choosing this option means you pay more interest and we would advise you not to do this. . It is not recommended as a long-term solution because if you make only the minimum monthly repayments, you will pay more interest and it will take you longer to pay off your balance. 

Interest

When you use your Credit Card, you are borrowing money from a lender – and will be charged interest unless you repay the full closing balance within a specified period. Interest is usually expressed as an annual
percentage rate, also known as the interest rate.