What is a high credit limit credit card?
Credit cards with limits of $20,000 or more are typically considered high credit limit cards. Each credit card has a predetermined credit limit set by the lender based on their evaluation of your creditworthiness. You are only permitted to spend up to the specified limit on the card.
When used responsibly, high limit credit cards can be valuable financial tools that provide added flexibility to your credit line. For instance, with a higher credit limit, you may be able to consolidate balances from multiple cards into a single, more manageable account.
Types of credit cards with high limits
Various banks, lenders, and supermarket credit card providers offer different types of high limit credit cards. These include high limit balance transfer cards, charge cards, business and corporate cards, and Gold, Platinum, and Black cards.
1. Gold, Platinum, and Black credit cards
Premium credit cards are designed for high-income individuals and frequent spenders, offering elevated credit limits and additional perks such as generous rewards programs, complimentary travel insurance, concierge services, and airport lounge access.
However, it's crucial to note that Gold, Platinum and Black cards often come with high annual fees and interest rates. To avoid negating the value of the points earned, it's important to pay the balance in full each month, as interest charges on a large balance can quickly accumulate.
2. Balance transfer credit cards
When using a balance transfer credit card to transfer a large balance, ensure that the credit limit is sufficient to accommodate the amount. Additionally, consider the balance transfer limit, which defines the portion of the total credit limit that can be used for balance transfers. Depending on the card issuer, balance transfer limits typically range between 70% and 100% of the approved credit limit.
Helpful tip: Use our balance transfer credit card savings calculator to see how much you could potentially save.
3. 0% purchase credit cards
These offers provide a 0% interest period on purchases, allowing you to spread out the cost of a large expense over several months. A high credit limit can be particularly beneficial in this scenario, as it enables you to make a substantial purchase without overextending your credit.
4. Business credit cards
Business cards not only have higher average credit limits to accommodate larger purchases but also offer features tailored to business needs. These may include the ability to issue multiple employee cards and seamless integration with popular accounting software like Xero, QuickBooks, and Quicken.
5. Charge cards
Unlike credit cards, charge cards require the full outstanding balance to be paid monthly. Consequently, they don't have a credit limit or a pre-set spending limit, although the issuer — usually American Express — will periodically assess your creditworthiness. Charge cards are available for personal, business, and corporate use.
For instance, a charge card could provide a business with a large monthly ad spend more financial flexibility compared to a credit card with a fixed credit limit.
Important things to keep in mind about high limit credit cards
When deciding to switch to a high credit limit credit card, carefully analyse your financial needs. In some cases, applying for a higher credit limit may not be your best credit card option.
1. Spending habits
If you're considering a high limit card to have a larger credit allowance for online shopping, vacations, a new car, or other significant expenses, ensure that you'll have the funds to pay off the balance within a reasonable time frame. While there are more affordable ways to borrow large amounts, a credit card can be effective if you have a long interest-free period and can repay the balance before that window closes.
2. Eligibility
Before approving your card application, the lender will review your payment history on existing credit commitments, your overall credit history, and your credit score. If they determine that you haven't been paying down your balances sufficiently each month, your application for a larger limit will likely decline. Conversely, you may find that you're often offered more credit when you don't actually need it.
3. Interest rates
Using a high limit credit card can lead to serious financial problems if not managed properly. Since most of these cards have standard or higher interest rates, failing to pay the balance in full each month can result in substantial interest charges. If you're unsure about your ability to repay the balance, it may be wise to consider alternative options.
