Financial glossary
Credit Limit
In plain English
The maximum revolving balance an issuer permits on an account and the denominator used to calculate that card’s utilization ratio.
Credit limit
A credit limit is the maximum revolving balance a card issuer permits on an account. It is also the denominator in that account’s credit utilization ratio. A $2,000 balance on a $10,000 limit represents 20% utilization; if the issuer reduces the limit to $5,000 while the balance stays unchanged, utilization rises to 40%.
An issuer sets the limit using its underwriting criteria and may raise or lower it later. Income, payment history, credit information, account use, and issuer policy can influence a decision. Requesting an increase does not guarantee approval and may involve a credit inquiry, depending on the issuer.
Available credit is normally the limit minus posted balance, adjusted for pending transactions or account-specific holds. It is not extra income and should not be treated as an affordable spending target.
For a balance transfer, the approved limit may determine how much debt and fee the new account can accept. An advertised maximum is not necessarily the amount an applicant receives.
Use the credit utilization calculator with limits shown on a recent credit report when reconstructing reported ratios. If a limit changes, update it immediately because both the per-card and overall calculations can move even without a new purchase.
Related calculators
- Credit Utilization CalculatorCalculate total and per-card credit utilization, then see exactly how much to pay down to reach your target ratio. Private and instant.
- Credit Card Balance Transfer CalculatorCompare a balance transfer with keeping your current card. Include the transfer fee, promo APR, post-promo APR, payoff time, and real savings.