FilippoBacci/Getty Images
Key takeaways
- It’s a good idea to take as much credit as lenders will qualify you for, if you can use it responsibly and pay it off monthly
- You should aim to keep the amount of your total credit line you use, or your credit utilization ratio, below 30 percent
- Keep in mind your interest charges on unpaid balances, as well as other fees, also count as part of your credit limit
- If you go over your total available credit, your card will be declined unless you have opted into over-limit protection
How much credit should you have? It really depends on what you do with it. Since your credit score is tied to the percentage of your available credit that you’re currently using, it’s a good idea to accept as much credit as lenders are willing to offer you — as long as you pay off your balances regularly and keep the amount of credit you’re currently using below 30 percent.
If you have trouble paying off your balances or consistently run up against your credit limit, you might want to avoid taking on additional lines of credit to reduce the risk of escalating debt. However, if you’re managing your credit responsibly, asking for a higher credit limit or opening a new credit card can be a smart move. In fact, increasing your available credit is a great way to increase your credit score.
What is a credit limit?
A credit limit is the maximum amount of money you are allowed to borrow from a line of credit. If you have a credit card with a $5,000 credit limit, for example, you can carry a balance of up to $5,000 on that card.
What happens if you go over your credit card limit? It depends on whether you’ve opted into what is commonly called “over-limit protection.” If you haven’t opted in, your credit card will be declined and the charge won’t go through. If you have signed up for over-limit protection, your charge might go through — but you will likely also get hit with an over-limit fee.
Some people don’t realize that interest on unpaid balances also counts towards your balance (as do fees and penalty charges). You may think that you’ve only made $4,000 in purchases on a card with a $5,000 limit, for example, but if you’ve only been making the minimum payment each month, your credit card’s interest could start pushing you closer and closer to your credit limit.
How much credit should you have?
Credit card issuers determine your credit limit in one of two ways: either they offer credit cards with predetermined credit limits (which means that everyone who gets accepted for the card is offered the same credit limit) or they give you a customized credit limit based on your credit history and your credit score.
Either way, the amount of credit available to you is probably going to reflect your current credit health. If you have bad credit, for example, you’re probably only going to be eligible for credit cards with low credit limits. If you have good or excellent credit, you’ll probably be offered significantly higher lines of credit — and you can also request credit limit increases if issuers aren’t already boosting your credit limit on a regular basis.
There’s no one answer to the amount of credit you “should” have. It’s a good idea to accept as much credit as lenders are willing to offer you, as long as you’re in a position to use that credit responsibly.
How much credit should you use?
Although it’s to your advantage to have as much credit as lenders are willing to give you, that doesn’t mean that you should use all of your available credit. In fact, using too much credit could hurt your credit score.
Why? Because 30 percent of your credit score is determined by your credit utilization ratio. This ratio represents the amount of credit you have available to you versus the amount of credit you are currently using. For instance, if you have $10,000 in available credit and a $5,000 balance, your credit utilization ratio is 50 percent.
To gauge whether your card balances are dampening your credit score, check out Bankrate’s credit utilization ratio calculator and take the next steps toward improving your financial opportunities.
One of the best ways to improve your credit score is to lower your credit utilization ratio. A good rule of thumb is to keep your credit utilization under 30 percent. This means that if you have $10,000 in available credit, you don’t ever want your balances to go over $3,000. If your balance exceeds the 30 percent ratio, try to pay it off as soon as possible; otherwise, your credit score may suffer.
If you use a credit monitoring service to track your credit score, you might notice that your credit score goes up or down by a few points every time you use or pay off your available credit.
The bottom line
There’s no magic amount of credit that a person “should” have. Take as much credit as you’re offered, try to keep your credit usage below 30 percent of your available credit and pay off your balances regularly. With responsible use and better credit card habits, you can maintain a good credit score.
FAQs
What is the ideal amount of available credit? The ideal amount of available credit to shoot for is any amount over 90 percent of your credit limits. For best results, you should strive to maintain $9,000 in available credit or more for every $10,000 in credit limits you have.
What is a good amount of available credit to have? ›
Having $20,000 in available credit is good if you use no more than $6,000 of that limit. It's best to keep your usage to $2,000 or less at any one time. That way, you keep your credit utilization ratio below 10%, which is great for your credit score.
Is $8000 a good credit limit? ›
If you're just starting out, a good credit limit for your first card might be around $1,000. If you have built up a solid credit history, a steady income and a good credit score, your credit limit may increase to $5,000 or $10,000 or more — plenty of credit to ensure you can purchase big ticket items.
What percentage of available credit should you stay under? ›
Most credit experts advise keeping your credit utilization below 30 percent, especially if you want to maintain a good credit score. This means if you have $10,000 in available credit, your outstanding balances should not exceed $3,000.
Is $50,000 a good credit limit? ›
Yes, $50,000 is a high credit card limit.
Can too much available credit hurt your score? ›
As long as you don't use your available credit to run up high balances, a high level of available credit won't hurt your credit. In fact, available credit can improve your credit utilization, which accounts for 30 percent of your credit score.
Is it bad to have zero balance on a credit card? ›
Keeping a zero balance is a sign that you're being responsible with the credit extended to you. As long as you keep utilization low and continue on-time payments with a zero balance, there's a good chance you'll see your credit score rise, as well.
What is the average credit limit in America? ›
The average credit limit on credit cards in the U.S. was $29,855 as of the end of the third quarter (Q3) of 2023. That's a 6.8% increase from Q3 2022, when the average credit limit was $27,955.
What credit limit is too high? ›
Any credit limit of five figures or more is broadly accepted as a high credit limit. Unfortunately, credit card issuers rarely publish their credit limit ranges. In most cases, you won't know what credit limit you'll get until you apply and get approved.
What credit card has a $5000 limit with bad credit? ›
The U.S. Bank Altitude Go Visa Secured Card is the best option if you have limited/poor credit and are looking for a high credit limit. You can deposit anywhere from $300 to $5,000, making your maximum credit limit available $5,000.
While a 0% utilization is certainly better than having a high CUR, it's not as good as something in the single digits. Depending on the scoring model used, some experts recommend aiming to keep your credit utilization rate at 10% (or below) as a healthy goal to get the best credit score.
Should I pay off my credit card in full or leave a small balance? ›
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
Why is my credit score going down when I pay on time? ›
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
Is credit limit based on income? ›
What Affects Your Credit Limit? Most companies check your credit report and gross annual income level to determine your credit limit. Factors that issuers are likely to consider include your repayment history, the length of your credit history, and the number of credit accounts on your report.
Is it better to increase credit limit or get a new card? ›
If you like your current card, asking for an increase could be the right move. But if you're looking for additional rewards or a better rate, opening a new line of credit may be the right option. No matter what you choose, always remember to use credit responsibly and spend within your means.
What credit cards have a $20,000 limit? ›
For those looking for a Credit Cards with $20000 Limit Guaranteed Approval, there are several options available, including the Chase Sapphire Reserve, American Express Gold Card, Ink Business Preferred Credit Card, Capital One Venture X Rewards Credit Card, and the Chase Sapphire Preferred Card.
Is $1500 credit limit good? ›
Chip Lupo, Credit Card Writer
a $1,500 credit limit is good if you have fair, limited or bad credit, as cards in those categories have low minimum limits.
Is a 20k credit limit good? ›
Yes, $20,000 is a high credit card limit. Generally, a high credit card limit is considered to be $5,000 or more, and you will likely need good or excellent credit, along with a solid income, to get a limit of $20,000 or higher.
How much should I spend if my available credit is 200? ›
You can spend your available credit up to your credit maximum. However, staying below 30% of your total available credit line will be best for your credit score. Spending more than you can afford to repay can result in a debt spiral that quickly compounds with interest payments.
What percentage of credit limit is good? ›
To maintain a healthy credit score, it's important to keep your credit utilization rate (CUR) low. The general rule of thumb has been that you don't want your CUR to exceed 30%, but increasingly financial experts are recommending that you don't want to go above 10% if you really want an excellent credit score.
