What is a credit limit?

Put simply, your credit limit it’s the maximum amount you can borrow on a credit card.

How a credit limit works

Below we’ve provided a simplified example, just to show how credit limits work in practice.

Imagine your new credit card has a credit limit of £1,000.

This is the maximum amount you can borrow right now, although if you manage your account carefully, it could change in future.

Using your credit card reduces your available credit.

If you spend £400 on essential home improvements, you’ll have £600 of your overall credit limit remaining as ‘available credit’ to use.

Repayments increases the amount of available credit.

If you pay £100 towards your balance when your statement arrives, as well as any interest and charges, your available credit will increase to £700.

Your credit limit isn’t a target

If you’re up to, or over your credit limit every month, this could be reported on your credit record, which might affect your chances of being offered credit again in future.

If you go over your credit limit


Straight away
 

  • Further transactions might be declined.
  • Additional fees and charges might apply.
  • You could lose any introductory or promotional interest rates on your account.

Longer term

 

  • Your credit score could be affected, making it harder for you to get credit in future.
  • Lenders may be less likely to provide new offers and higher credit limits in future.

How is your credit limit set?

Your credit record

Credit reference agencies hold information about you and your financial past, issuing you with a credit score. Lenders refer to this information, helping them to assess the risk of offering you credit.

Affordability

Lenders also consider what you can reasonably afford to repay for the foreseeable future, based on things like your income and the total amount of credit that’s already available to you.

Current and past accounts

Lenders usually keep records about accounts you’ve held with them in the past, including information about how well they’ve been managed.

Changing your credit limit

Many lenders offer the option to increase your credit limit if you need more flexibility on your existing credit card, or decrease it if you’d like to limit the amount of credit available to you.

Especially if you’re thinking of increasing your credit limit, ask yourself:

  • Does this suit my borrowing needs, or should I consider other options?
  • Will I be able to make repayments, even if my circumstances change?

It’s important to know that credit limit increase requests are subject to security and credit checks.

More on changing your credit limit

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Where to find help

If you’re ever experiencing money worries, or would like additional support with Halifax products and services, please let us know so we can find a way to help.

Frequently asked  credit limit questions
 

  • You can check your credit limit in a few ways:

  • Lenders could reduce your credit limit for a number of reasons, including:

    • A legal or regulation change.
    • A lender, product or service change.
    • Concerns that there’s an increased risk you won’t be able to repay what you owe.

    We’ll always let you know if we decrease your Halifax credit card limit, which will be reflected in your online accounts and future statements.

    Just so you know, a credit limit decrease could negatively affect your credit score, which could make it more difficult to get credit in future.

  • Your credit limit isn’t set monthly or annually. It stays with you for as long as you have your credit card account, although it can increase or decrease over time, either because we’ve changed it, or you’ve requested a change.

A summary on credit limits

Your credit limit is the maximum amount you can borrow on a credit card.

 

  • The credit limit offered is based on a lender’s assessment of your personal circumstances.
  • Just like your credit score, your credit limit can go up or down over time.
  • Stay within your credit limit to avoid charges and losing any promotional interest rates.
  • Your credit limit isn’t a target – it’s up to you to only borrow what you need and can repay.

Halifax is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628.