What is Credit Card Limit and How Do Banks Determine It?

The credit card limit is one of the most important things to understand when applying for a card. After all, it affects how much you can spend with your plastic card. Of course, you want to have the highest possible limit because that means increased purchasing power.

Unfortunately, you'll never know how much your credit limit will be until you're approved for a credit card. The closest you can get to predicting your credit limit is finding out how banks arrive at this figure. This will give you an idea of whether you'll get a high or a low credit limit.

While you're looking for the right credit card, get to know what a credit limit is and how it's calculated.

What is a Credit Card Limit?

A credit card limit is the maximum balance you can have on your card at any given time. It includes your purchases, finance charges, service and penalty fees, balance transfers, and cash advances.

Put simply, it's the total amount you can spend using your card. The higher it is, the more you can charge to your credit card.

If you own multiple credit cards from a bank, it may either set a credit limit for each card or a single limit across all your cards.

👉 How Do Credit Card Limits Work in the Philippines?

You can keep using your card as long as you pay your credit card bills regularly and stay within your credit limit. When you reach your credit limit, the issuing bank may either decline your succeeding purchases with your card or charge you an overlimit fee until you've paid off at least a portion of your balance.

Read more: 12 Credit Card Fees in the Philippines to Watch Out For

How Do Banks Set Your Credit Limit?

On a secured credit card, you can control your credit limit because it's equal to 80% to 95% of your security deposit (which serves as your collateral) to the issuing bank.

But for unsecured or traditional credit cards, it's a lot more complicated. Credit card providers decide how much credit limit customers can have on their credit cards. However, they don't do it randomly.

3 Factors That Affect Minimum and Maximum Credit Card Limits in the Philippines

So how can you know your credit card limit? Banks conduct credit evaluations to decide how much credit to give to each applicant. They consider a variety of factors to get a full picture of one's financial status, accurately determine creditworthiness, and come up with a reasonable credit limit.

🔍 Credit History

Your credit history shows how disciplined you've been in managing your debts and maintaining a good credit score.

If you've been a good borrower, you're likely to get a higher credit card limit. But if your credit history is poor (e.g., missing or making late payments, exceeding the credit limit on other cards, etc.), banks will give you a lower credit limit.

Having no credit history^[1] will also lead to a low card limit because banks have no credit data to use as a basis for calculating the credit limit.

🔍 Income

Your salary, benefits, and other income sources, as indicated in the income documents (payslips, income tax returns, Certificate of Employment, etc.) you've submitted to the bank, are also used to determine your credit limit.

A high income raises your chance of getting a high card limit. But your income alone doesn't guarantee that the bank will approve a high credit limit for you. Your level of debt and of course, your credit history, come into play as well.

🔍 Debt-to-Income Ratio

Banks check your debt-to-income ratio^[2] to help them decide the limit they'll give to you. They look at your loans, mortgage, and other credit cards to know how much of your income is needed to pay for your debts.

To compute your debt-to-income ratio, get your total monthly debt payments and divide them by your gross monthly income.

You want your debt-to-income ratio to be low (ideally 12% of your income or lower) because this results in a high credit card limit. If yours is high, you're likely to get a low credit limit even if your income is high.

Is It Good to Have a High Credit Limit?

A higher credit card limit isn't for everyone. It may either work for or against you, depending on your spending habits, financial status, and discipline.

People who exercise discipline in their spending and enjoy enough income to pay their monthly credit card payments can benefit the most from a credit limit increase.

Do you really need a credit limit increase? Before you request one, consider its pros and cons first. Think about how it will affect your finances both in the short and long term.

Advantages of Credit Limit Increase

👍 Improved Credit Score

This advantage will work only if you don't overspend with your card and can afford your monthly credit card bill.

A large credit card limit lowers your credit utilization ratio in the Philippines^[3] (how much you owe on your card compared to your available balance), which leads to an increase in your credit score.

For example, if you have a ₱50,000 credit limit and you've spent ₱25,000 using your card, your credit ratio is high at 50%. But if your credit limit is increased to ₱100,000, your ratio becomes only 25% with the same amount spent on your card.

This matters, especially if you have a bad credit score or no credit history yet. It's what banks and lenders use to evaluate your capacity to repay a loan or credit card.

Read more: How to Check Credit Card Balance: 5 Easy Methods

👍 Greater Purchasing Power

An obvious reason to go for a higher credit limit is the increased spending potential that comes with it. You can buy a gadget or appliance without having to worry about maxing out your credit card—plus you get the added flexibility of paying in monthly installments!

A large credit limit is especially helpful during an emergency, like when a family member gets hospitalized and you have no access to cash for the medical bill.

👍 Higher Potential for Earning Credit Card Rewards

With greater spending power, you can use your credit card for more purchases (as long as you can afford them) and maximize the rewards points you earn.

Disadvantages of Credit Limit Increase

👎 Higher Monthly Credit Card Bill

If you receive a credit limit increase, there's the temptation to spend more and max out your card. Your total amount due will get higher, which your budget might not afford. You're then likely to fail to settle your balance in full, paying only the minimum balance or skipping payments.

👎 Higher Risk of Credit Card Debt

A large credit limit and a lack of financial discipline are a terrible combination. It can put you in a rough financial patch if you can no longer afford your monthly credit card payments. Your unpaid balance will increase month after month (due to interest charges), and you'll end up with a large amount of debt.

Do you tend to splurge often? Reconsider your decision to get a higher credit limit.

Read more:

• What is the Minimum Amount Due on a Credit Card and How is It Calculated?
• Is It Best to Pay Your Credit Card in Full? What Happens If You Don't?

How to Increase Your Credit Card Limit in the Philippines

Unhappy with your current credit limit? The good news is that you aren't stuck with it forever. Here are the different ways you can try to get a higher credit limit.

✅ Manage Your Credit Card Responsibly

Banks review their clients' credit and adjust card limits accordingly. If you've been a responsible borrower for several months—if, for instance, you pay off your monthly balance and avoid maxing out your card—your credit card provider might increase your credit limit, which will show on your statement of account.

✅ Request the Bank to Increase Your Credit Limit

However, not all banks automatically raise credit limits. If that's the case with your credit card provider, you'll have to apply for a higher credit limit by calling the bank's customer service hotline. The bank will ask you to update your income and provide necessary supporting documents so that it can properly assess your current credit limit.

Certain banks also allow clients to request a card limit increase through their online banking account. 

✅ Increase Your Security Deposit

If you have a secured credit card, all you have to do to raise your credit limit is to add more money to your holdout deposit with the bank. But before doing so, check with your bank for the exact procedure. Also, ask the bank about the maximum credit limit allowed on your card.

✅ Get More Than One Credit Card

If your request for a credit card limit increase is rejected, your other option is to get another credit card, either with your current issuing bank or with another provider. This will give you a higher total credit limit on all your credit cards.

Read more: No Overspending and Late Payments: How to Manage Multiple Credit Cards

Credit Card Limit FAQs

1. Is the credit limit monthly or yearly?

In the Philippines, credit limits are set on a monthly basis. If your credit limit, for example, is ₱40,000, then this is the maximum amount you can spend using your credit card each month. So yes, credit card limits do reset every month.

2. What is the lowest and highest credit limit in the Philippines?

The lowest starting credit card limit in the Philippines for first-time credit cardholders is reportedly around ₱20,000. Meanwhile, credit limits can go as high as ₱1 million for platinum and other high-tier credit cards. 

3. Why was my credit limit increase request denied?

Several factors cause banks to decline a client's request for a credit limit increase. If yours is denied, you might have a poor credit score or an income too low to be eligible for the increase.

When was the last time you received a credit limit increase? You might have requested another increase too soon. Wait for a year before trying to ask for a change in your credit limit.

4. What happens when I purchase more than my credit limit?

Wondering how much you can go over your credit card limit? It depends on the card you have. Some don't allow you to go over your limit at all, resulting in a declined transaction. 

Let's say your credit card limit is ₱30,000 and you want to buy a laptop with a price of ₱46,000. If you find yourself in this situation, you can pay the ₱30,000 using your credit card and the remaining ₱16,000 with cash.

However, this is only ideal if you have extra money to spare. Don't buy something you can't afford. Shop for other options and go for an item that you can pay off every month.

Final Thoughts

While your actual credit limit is unpredictable when you're applying for a card, you can eventually raise your chance of getting approved for a higher credit card limit. Improve your credit score, find multiple income streams to generate more income, and manage your credit cards responsibly.

Looking for cards that offer the highest credit limits? Consider options in the Platinum or World tiers. Check out such cards from Metrobank, HSBC, Security Bank, and BPI:

Credit Card	Key Features
Metrobank Platinum Mastercard®	1 rewards point for every ₱20 spend Up to 50% off on premium dining offers eCommerce purchase protection up to US$200 Free 310,000 reward points if you apply until October 31, 2023 and meet the minimum spend of ₱70,000 No annual fees if you apply until October 31, 2023 and meet an annual spend of ₱400,000
Metrobank World Mastercard®	1 rewards point for every ₱20 spend 2x reward points for international purchases Up to 50% off on luxury dining deals Free 300,000 reward points if you apply until October 31, 2023 and meet the minimum spend of ₱90,000  No annual fees if you apply until October 31, 2023 and meet an annual spend of ₱600,000
Security Bank Platinum Mastercard	Dual currency billing Two complimentary lounge access annually in more than 1,000 lounges in 500 airports worldwide Unlimited access to the Sky View Lounge (NAIA T3) Up to US$200 coverage with Mastercard E-Commerce Purchase Protection  Free travel insurance
Security Bank World Mastercard	Free travel insurance coverage up to ₱10 million Membership to more than 1,000 lounges in over 500 airports worldwide Dining, spa, and retail offers from select exclusive airport merchants
BPI Platinum Rewards Card	2 BPI Points for every spend on foreign transactions abroad or online worth ₱20 Low forex conversion rate of just 1.85% Up to ₱10 million in travel insurance coverage 0% interest on airline installment all year round Free airport lounge access with spend requirement

Sources:

• ^[1] Is No Credit Better Than Bad Credit? (The Balance, 2022)
• ^[2] What is a debt-to-income ratio? (CFPB USA, 2023)
• ^[3] How to Calculate Your Credit Utilization Ratio (Nerdwallet, 2023)