How to increase your credit limit (and whether you should)

William Jolly By on July 16, 2019
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Credit limit increase

Photo by tom coe on Unsplash

Maxed out a credit card or two recently? You can always try and get your credit card limit increased, but it’s not always a good idea to do so…

What’s in this guide:

What is your credit limit?

Your credit limit is a limit set by your credit card provider that caps the amount of money you can borrow on that credit card at any one time. Determined by the credit provider during your application based on your financial status, history and credit score, credit limits can vary significantly depending on the card and the person.

A person with a low income applying for a low-fee or low-rate card will probably get a low credit limit of maybe a few thousand dollars, while a big-shot executive applying for a card using the wifi on their private jet will likely get a much higher (or even unlimited) one. 

If you have a credit limit of $5,000, that means you cannot have more than $5,000 of unpaid debt on that card at any one time. So if you reached the limit and paid off $2,500 one month, you’d only be allowed to spend $2,500 the next month until the limit gets hit again. And when it does, you’ll be prevented from spending any more and possibly even face the prospect of having your account closed.

At the moment, the average credit limit in Australia sits at around $9,300. This figure has fallen slightly recently but is still pretty close to the highest it’s ever been. 

how high are our credit limits

But for some people, this much might not be enough.

Why might you want a bigger credit limit? 

There are a number of reasons why you might want an increased credit limit, the most obvious being you keep hitting the one you currently have. While you might associate reaching your credit limit as a sign of reckless overspending (which isn’t entirely unwarranted), hitting your credit limit isn’t always a bad thing for responsible credit card owners.

For example, some people choose to put all or most of their regular spending onto a credit card in order to maximise rewards points. In this instance, not having a high enough credit limit could limit the amount of rewards you could earn.

We should also mention that hitting your credit limit on a card taken out before July 2012 can result in an over-the-limit fee of up to $40 each time. On credit card accounts opened after this date, providers may still charge you an over-the-limit fee if they have your consent.  

In addition to increased spending power, a bigger credit limit can also give you a bit more leeway for a rainy day or an emergency. One of the main benefits of credit cards is they can be used at a moments notice, which can make them handy for situations where money is desperately needed.

This isn’t a recommendation to go out and blow thousands of dollars on an ’emergency’ TV, but if you were in something like a car accident and needed money quickly, a bigger credit limit could help here.

Is it a good idea to increase your credit card limit? 

Having a higher credit limit won’t always be a good thing. For starters, being able to spend more on a credit card can lead to higher levels of debt – the average credit card debt per person in Australia has been consistently hovering around $2,000 for some time now.

Another reason for avoiding higher credit limits is the potential risk they can pose to loan applications. A lender will typically judge the credit limits on any credit cards you have as actual debts, even if there’s no outstanding debt on the card or if you have a good track record of consistently paying off the debt.

Lenders don’t really care about your outstanding credit card balance – to them, it’s your credit limit that matters. For example, if you have a credit card with a $20,000 credit limit and a back-up one with a $5,000 limit, a home loan lender may judge you as someone with a $25,000 debt on their hands.

So having a bigger credit limit will generally limit your borrowing capacity. Don’t be fooled by any articles you might read which suggest a higher credit limit can boost your credit score by lowering your “credit utilisation ratio” – the ratio between your actual credit card debt and your credit limit. This concept is applicable in the USA, where a credit utilisation ratio of under 30% is said to be good for your credit score, but not in Straya.

Here, lenders generally assume your credit limit is fully-utilised when assessing your application for credit. So if you’ve got your sights set on the property market in the near future, maybe consider reducing your credit limit.

Finally, applying for a higher credit limit and being rejected will cause a credit inquiry to appear on your credit history. If too many of these show up, your credit score can suffer, which in turn can make it even harder to apply for other credit or lending products in the future. 

So to summarise these points: 

Pros of raising your credit limit Cons of raising your credit limit 
More freedom to spend Increased chance of overspending 
Greater potential for rewards pointsIncreased chance of accruing debt 
Less chance of being charged over-the-limit feesCan harm loan applications 
More emergency money   Can harm your credit score if rejected 

How to apply for a credit card limit increase 

Recent rule changes – including July 2019’s New Banking Code of Practice – have made it so banks and credit providers are no longer legally allowed to offer unsolicited credit limit increases. That is, they can’t call you out of the blue and tempt you. Instead, you have to make the first move and contact them. If you look again at the infographic near the beginning of this article, you can also see the point in 2018 when it was announced by ASIC that credit providers had to judge an applicant’s ability to repay a credit limit within three years instead of the previous five, which caused credit limits to fall.  

So you have to contact your credit card provider to get an increase. How to do this varies based on who you’re with. You might have to either call a specific number, fill out an online credit limit increase application form and email it to them, visit a branch if they have one or log in to their app or online banking portal. 

As an example, here are the various ways each of the big four allow their customers to request credit limit increases: 

BankHow to request a credit limit increase
ANZApply for a credit limit in ANZ internet banking or in-app

Visit a branch during business hours 

Call 12 22 73
CBAClick credit limit changes in NetBank

Hit credit limit in the CommBank app 

Visit a branch during business hours 
NABRequest an increase in-app 

Hit ‘change my credit card limit’ in NAB’s desktop banking 

Call 13 22 65 

Visit a branch during business hours 
Westpac Call 1300 651 089

Visit a branch during business hours

Request a credit limit increase in Westpac’s online banking

While credit card providers have the right to decrease your credit limit at any time (with prior warning of course), they are under no obligation to accept your request for a credit limit increase. But you can increase your chances of being approved, which we’ll look at now.  

Tips for getting approved for higher credit limit 

  • Use the card regularly: Customers who used their cards frequently tend to be favoured by credit card providers since these users earn the providers more through merchant fees and surcharges. If you’re a proven credit card user, they’re more likely to want to keep you around over someone who used the card once a month.
  • Have a good history of meeting repayments: Contrary to what you might think, credit card users who regularly rack up debts aren’t that loved by the card’s provider since these people don’t pay back the money they owe straight away. A more responsible credit card user is more likely to be approved for a credit limit increase since they have a proven track record of not going off the deep end when it comes to credit card debt. 
  • Keep your expectations reasonable: Being conservative is key for credit limit applications – do you really think they’re automatically going to accept a $50,000 increase? Credit card providers have to carefully assess each application under responsible lending laws, so a more measured increase in your credit limit is more likely to get over the line than a massive one. 
  • Play hard to get: if you’ve recently been rejected for a credit limit increase, don’t go desperately applying again. Like when chatting up someone in a bar, just play it coooool. Applying again and being rejected (again) in a short space of time can harm your credit score, which doesn’t make your task any easier. So take a bit of time to work on building your score and your repayments history, and you’ll probably have an easier go of it next time. 

As mentioned before, a credit provider can actually decrease your credit limit at their own discretion, so it’s important to make a good case for yourself. 

Savings.com.au’s two cents 

Increasing your credit limit can work in your favour if you’re one or several of the following: 

  • You’re a responsible credit user who doesn’t rely on your card to get by;
  • You find yourself getting close to your limit or reaching it regularly; 
  • You want to try and maximise your rewards points by spending more 

But decreasing your limit can work too, especially if you’re someone who has struggled with overusing a credit card or three in the past, or you’re thinking of applying for a home loan soon and want to boost your creditworthiness. 

William Jolly
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.
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