Understanding Credit Card Limits

credit card limits refer to the maximum amount a bank allows you to borrow using your credit card. Whether you are issued standard cards or high credit limit credit cards, the assigned limit depends on several financial and risk factors, including

Your salary
Your debt-to-income ratio
Your credit Score and debt repayment history

Total Credit Limit vs. Available Credit Limit

The total credit limit is the maximum amount of credit assigned to you by the bank. When you use any part of your total credit limit, the remaining balance is known as the available credit limit.

For example, if you have a credit card with a total credit limit of AED 10,000 and you use AED 1,000, your available credit limit would be AED 9,000.

While total credit card limits remain fixed unless revised by the bank, available limits fluctuate based on your spending and repayments. Managing this balance is especially important for holders of high credit limit credit cards.

How Your Credit Card Limit Impacts Your Credit Score?

While your credit limit does not directly impact your credit score, your Credit Utilisation Ratio (CUR) does.

Having a high CUR, like 90%+, impacts your credit score negatively as lenders mark a high CUR as risky behaviour. Keeping a CUR of less than 30% and paying your credit card bills on time ensures your credit score is stable and growing over time.

Ways to Check Your Credit Card Limit

You can easily check your credit card limits through:

Mobile banking application
Internet banking portal
Credit card statement
ATMs that support your credit card
Phone banking

Monitoring your credit card limits helps you control spending and maintain a healthy CUR

Tips to Increase Your Credit Card Limit

If you aim to qualify for high credit limit credit cards, improving the following areas can help:

Income: If you can show a stable additional income to your bank, it may help you avail of a credit limit increase.
Debt-to-income Ratio: If you have recently repaid existing debt, which has helped you reduce your DTI ratio, it may make you eligible for a higher credit limit.
Credit Score: If you have a high credit score with flawless repayment history, you may be eligible for a higher credit limit.

Advantages of Higher Credit Card Limits

The biggest advantage of high credit limit credit cards is improved credit utilisation. Increasing your credit card limits allows you to spend the same amount while keeping CUR under control.

For example, raising your limit can reduce CUR from 40% to under 30%, improving credit score potential. Hence, the real benefit of high limit credit cards lies in better credit health, not just higher spending power.

How to Manage When You Have a Lower Credit Limit?

When you have lower credit card limits, you must still refrain from using more than 30% of your credit limit regularly. This is crucial because your credit score also plays a significant role in determining your credit limit, and having a high CUR can negatively impact your chances of getting approval for a higher credit limit.

How to Prevent Your Credit Limit From Being Reduced?

Banks may reduce credit card limits due to risky behaviour. To avoid this:

Always repay your credit card bill on time (preferably in full)
Keep your credit utilisation low (under 30%)
Try not to max out your credit cards
Be mindful of applying for new credit instruments
Do not close old credit card accounts

These practices are essential, even for users of high credit limit credit cards.

Common Reasons Why Your Credit Limit May Change

Your credit limit may change due to any of the following reasons.

Maxing Out Credit Card: If you are maxing out your credit cards regularly, your banks may consider a credit limit reduction.
Poor Repayment: If you are not repaying your credit card bill in full regularly, it may lead to a credit limit reduction.
Debt-to-Income Ratio: If your DTI ratio is close to 50%, the bank may reduce your credit limit.
Credit Score: If your credit score has unexpectedly decreased, it may reduce your credit limit.
Income: If your income has reduced, it may prompt a reduction of your credit limit.

Maintaining stable financial habits helps preserve high credit limit credit cards.

How You Can Manage Your Credit Card Limits in UAE