What is a credit limit?
Your credit limit is the maximum amount you can spend on your credit card at any time. It’s calculated based on factors like your income, assets, regular expenses, and credit score. While you can request a specific limit when applying, the final decision is made by the credit card provider using their lending criteria, so it’s not something you can calculate exactly in advance.
How to calculate or increase your credit limit
You can’t determine your exact credit limit, but you can estimate it by:
- Consider your monthly expenses like rent and bills to see your disposable income.
- Look at your income (higher income often means a higher limit, e.g., cards with a $75,000 minimum income might start at $6,000).
- Think about what you’ll use the card for, like daily purchases or holidays, and starting with a lower limit to avoid debt.
To increase an existing limit, request it online through your bank. Approval will depend on your credit score and history, timely repayments, and regular card use. Expect to wait at least six months after getting a new card to build a better credit history.
Minimum credit limits in Australia
In Australia, minimum credit limits vary by card, ranging from as low as $500 to over $10,000. For example, the Bankwest Zero Platinum Mastercard starts at $6,000. You can compare options on Credit Card Compare to find a card that suits your needs.
What you should look out for when increasing your credit limit
Increasing your credit limit gives you more spending power, but it can lead to overspending and higher interest charges if you carry a balance. There’s also a risk of defaulting if you can’t repay the larger balance, so communicate with your provider if you’re struggling.
