Credit Card Limits Explained: How They Work and Why They Matter

Understanding your credit card limit is an important part of building financial confidence. Whether you're applying for your first card, reviewing your current limit, or wondering “what is a minimum credit limit?”, knowing how limits work can help you make more informed choices and manage credit responsibly.

In this guide, we explain what credit limits mean, how they’re set, what influences increases and decreases, and how your limits may affect your borrowing profile. We also cover when a personal loan may be a more structured option for larger purchases, depending on your circumstances.

Many Australians use credit cards daily — and according to the Reserve Bank of Australia (RBA), average credit card balances have hovered around $2,800–$3,200 in recent years¹, making it worthwhile to understand how limits work and how they can influence your overall credit use.

(¹Based on RBA credit card statistics. Source: Reserve Bank of Australia – credit and charge card statistics.)

What is a credit card limit?

A credit card limit is the maximum amount you can owe on your credit card at any point in time. Your credit limit affects how much you can spend, and if you reach it, some transactions may be declined unless your provider allows a temporary increase or over-limit feature (where available and opted into).

Typical minimum and maximum credit limits

Minimum and maximum limits vary by provider and card type, and are based on eligibility and lending assessments.

Minimum credit limits

• Often between $1,000 and $2,000, depending on the provider and card product.
• Some low-limit products may start lower.

Maximum credit limits

• Can be much higher on premium cards, and may exceed $100,000 for some products.
• Some high-end products may not advertise a fixed maximum, but approvals typically depend on strict criteria and ongoing assessments.
• Rewards and premium cards often have higher limits because providers expect higher spending patterns (and assess affordability accordingly).

What is the minimum credit limit?

The minimum credit limit is the lowest amount a bank or credit provider offers on a particular card. It’s typically the starting limit for new customers and may be influenced by the card’s features, target market, and the lender’s risk settings.

This is the minimum credit limit meaning most people refer to when asking:

• What does minimum credit limit mean?
• What is a minimum credit limit on a credit card?
• Does minimum credit limit $500 mean I must spend $500? → No. It simply sets your maximum available credit.

Minimum limits are not required spending and they are not monthly minimums. They simply define the lowest limit that may be approved for that product.

How are credit card limits determined?

Although you can request a preferred credit limit when applying, the provider makes the final decision. Credit card issuers must follow responsible lending obligations and assess whether the credit limit is suitable and affordable based on the information you provide (including income and expenses).

Key factors that determine a credit limit

Income
Higher and more consistent income may support a higher limit, depending on expenses and existing debts.

Employment stability
Frequent job changes, casual work, or variable hours may affect the limit offered.

Credit history
A stronger repayment history and lower existing debt levels may help, while missed payments or high existing debt may reduce limits offered.

Current financial commitments
Lenders consider your existing loans, rent/mortgage, household expenses, and other regular commitments.

Card type
Different card products may have different minimum and maximum ranges.

Once assessed, the credit provider will notify you of your approved limit before you accept the contract.

If you’re checking your borrowing profile, you may find this useful: https://www.credit24.com.au/blog/what-is-a-credit-score

Credit limit vs available credit vs credit utilisation

These three terms are often confused:

Credit limit
Your total spending capacity (e.g., $5,000).

Available credit
Your remaining capacity after spending.
For example, if your limit is $5,000 and you’ve spent $1,000, you have:

• Available credit: $4,000

Credit utilisation
The percentage of your limit you’re currently using.
In the example above:

• Credit utilisation: 20%

Lower utilisation (often under 30%) is commonly considered healthier, but what’s “right” depends on your overall situation and repayment behaviour. Credit reporting bodies may consider utilisation alongside other factors such as repayment history.

What if you exceed your credit limit?

Two common outcomes can occur when you attempt to exceed your credit card limit:

1. New transactions may decline
Many cards automatically block additional spending once you’ve reached your limit.

2. Over-limit fees (older cards only)
Some cards opened before 2012 may charge fees if you exceed your limit. Newer cards typically don’t apply over-limit fees unless you’ve opted in to an over-limit feature (if available).

Other consequences

Exceeding or hitting your limit may lead to:

• Declined direct debits
• Failed subscription payments
• Temporary account restrictions

Credit card providers generally notify you if you approach or exceed your limit, but it’s still helpful to track your balance to avoid interruptions.

How to increase your credit card limit

Australian lenders generally can’t offer unsolicited credit limit increases, so to increase your limit you usually need to apply or request it.

If you request an increase, the provider will reassess your financial situation to determine whether the new limit is suitable.

How to improve your chances of approval

• Maintain low credit utilisation where possible
• Make repayments on time
• Request a modest, realistic limit increase
• Avoid applying with multiple lenders around the same time
• Review your credit report/score before applying

Credit score basics: https://www.credit24.com.au/blog/what-is-a-credit-score

Your lender may consider updated income, employment, and living expenses before deciding.

How to decrease your credit limit

Decreasing your credit limit is usually simpler than increasing it, and may be processed faster.

Reasons to lower your limit

• Reduce temptation or overspending
• Improve your debt-to-income position before applying for other credit
• Increase control and financial discipline
• Simplify budgeting

Many banks allow online limit reductions, sometimes instantly or within a short processing window.

Can your credit limits affect your credit score?

Credit limits can play a role in how your credit profile is assessed.

How credit limits can help

• A higher limit can reduce your utilisation ratio if your spending stays the same.
• Consistent on-time repayments can support a healthier credit report over time.

How credit limits can hurt

• Higher limits may increase the temptation to overspend, which can make repayments harder.
• Multiple cards with high limits may affect future loan applications because lenders assess total available credit, not just balances.
• Requests for a credit limit increase may involve a credit check, and those enquiries can appear on your credit report.

Australia’s Comprehensive Credit Reporting (CCR) system can include information such as credit limits, repayment history, and patterns of credit use.

Pros and cons of different credit limit levels

Because CMS can’t display tables, the comparison below is presented as bullet lists.

Higher credit limits

Pros

• More spending flexibility
• May support a lower utilisation ratio (if spending doesn’t rise)
• Can be helpful in emergencies (if managed carefully)

Cons

• Higher risk of debt if spending increases
• Can make budgeting harder if you rely on revolving credit
• May be harder to qualify for
• A higher limit can increase potential financial impact if repayments become difficult

Lower credit limits

Pros

• Easier budgeting for some people
• Can reduce the risk of overspending
• May help build disciplined habits with credit

Cons

• Less flexibility for emergencies
• Utilisation ratio can rise more quickly if you use a large portion of the limit
• May not cover larger planned purchases

How to choose the right credit limit for you

There’s no single “best” limit — it depends on your habits, income stability, and goals.

Key tips for choosing your limit

Assess your spending behaviour honestly
Knowing your habits can help you avoid taking on more credit than you can comfortably manage.

Consider income stability
If your income varies, a lower limit may be easier to manage consistently.

Plan for major purchases
A higher limit may help with cashflow, but consider whether an alternative with structured repayments may be more suitable.

Evaluate your self-control and budgeting system
The best limit is one you can manage confidently without relying on credit for everyday essentials.

Keep a buffer for emergencies (if appropriate)
A buffer can be useful, but avoid setting limits far higher than you need.

Review your limit regularly
Your situation can change — and your limit should match your current needs and capacity.

When a personal loan might be better than a high credit limit

There are times when a personal loan may be a more structured choice than increasing your credit card limit — particularly if you want predictable repayments and a clear end date.

Personal loans may be more suitable when you’re:

• Planning a large purchase
• Needing predictable repayments
• Wanting to avoid ongoing revolving debt
• Covering a one-off expense with a set timeline

Why Credit24 can help

Depending on eligibility, Credit24 personal loans may suit customers who prefer a set repayment schedule and a clear loan term. Loan amounts, rates, fees, and repayments depend on your application and circumstances, and lending criteria apply.

Apply now: https://www.credit24.com.au/au/apply/login

You may also like: https://www.credit24.com.au/blog/what-is-a-credit-score

FAQs about credit card limits

How often can I request a credit limit increase?
You can request an increase when your circumstances change, but approval depends on factors like income, spending behaviour, and repayment history. Frequent applications may also create multiple enquiries on your credit report.

Will a credit limit increase affect my credit score?
A limit increase request usually involves a credit check, which may be recorded as an enquiry. If approved, a higher limit can lower your utilisation ratio if spending stays steady, but outcomes depend on how you manage the credit over time.

Can I have different limits on different credit cards?
Yes. Each provider sets its own limits based on your circumstances and their assessment. Multiple cards and limits contribute to your overall credit profile.

What is the minimum credit limit I can have?
Many Australian cards start around $1,000–$2,000, though some products may offer lower limits. Minimum limits vary by provider and card type.

Why was my credit limit increase application rejected?
Common reasons can include insufficient income, recent job changes, high utilisation, missed repayments, or multiple recent credit enquiries. Lenders generally need to be satisfied the higher limit is affordable and suitable.

How do I know what credit limit is right for me?
Choose a limit you can manage comfortably without relying on credit for everyday living expenses. Consider your income, spending habits, savings buffer, and financial goals, and review your limit periodically.

Disclaimer

IPF Digital Australia Pty Ltd, trading as Credit24, ABN 59 130 894 405. Australian Credit Licence 422839. The information in this article is general in nature and does not consider your objectives, financial situation, or needs. Lending criteria, fees, and charges apply. For product details, eligibility requirements, and full terms and conditions, visit www.credit24.com.au.