How Does Your Credit Limit Stack Up to the Average American's?

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Credit cards are a great way to earn rewards and make large purchases you may not have the cash for right now. But they're also limited. You can only spend as much as your credit limit allows in a month. Try to charge more to your card and it'll get declined.

Your credit limit depends on your credit score, income, and other factors. Below, we'll take a look at how your credit limit compares to others and how you might be able to increase yours.

What's the average credit limit?

The average credit limit has risen over the last few years. Credit card owners in the 50th percentile had an original credit limit of just $1,656.41 back in the final months of 2020, according to the Federal Reserve Bank of St. Louis. But that number has risen steadily to $3,800 as of the first quarter of 2024. That's by far the highest it's been over the last 10 years.

On the one hand, high credit limits can be a good thing. They enable you to charge more to the card each month, which can facilitate larger purchases. It might also enable you to earn more cash back or travel rewards that you can use to offset the cost of future purchases.

Higher credit limits can also boost your credit score. This is because it lowers your credit utilization ratio -- the ratio between the amount of credit available to you and the amount you use. Generally, you want a credit utilization ratio of 30% or less to keep your score high. That means you'd limit your monthly charges to about $1,140 if you had the average $3,800 credit limit. When you have higher limits, you can spend more without raising your ratio too much.

But high credit limits also have their downside. For some, they encourage greater spending, even if the person doesn't have the money they need to pay their bill back at the end of the month. This can lead to a cycle of credit card debt that's difficult to get out of.

It's worth noting that the above figures are for the available credit limit at the time of origination -- that is, when you apply for the card. It does not include credit limit increases which may occur automatically or upon request as time goes on.

How do you increase your credit limit?

Increasing your credit limit is pretty straightforward. Most of the time, you can apply for a credit limit increase through your online account. The credit card company may ask for some information about your income and then it might need some time to review your request. If it's approved, you'll get a higher limit. If not, you should get a notice explaining why your request was denied.

Just as when you first apply for a credit card, the company may do a hard inquiry on your credit report when you request a credit limit increase. This drops your score by a few points. It's generally not wise to request a credit limit increase unless you feel you're likely to get approved.

Ensure you have a strong payment history and that your income hasn't dropped significantly since you first opened the card. You also don't want to apply for a credit limit increase more than once every six months. This raises red flags with lenders who may fear you're living beyond your means.

If you have any questions about how to request a credit limit increase or how much you might get, contact your credit card issuer for more information. Just remember, higher limits can be useful, but you still have to monitor your spending habits to make sure you don't wind up charging more than you can afford to pay back at the end of the month.

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