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Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. SHARE: FilippoBacci/Getty Images May 13, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Nicole Dieker has been a full-time freelance writer since 2012—and a personal finance enthusiast since 2004, when she graduated from college and, looking for financial guidance, found a battered copy of Your Money or Your Life at the public library. In addition to writing for Bankrate, her work has appeared on CreditCards.com, Vox, Lifehacker, Popular Science, The Penny Hoarder, The Simple Dollar and NBC News. Dieker spent five years as writer and editor for The Billfold, a personal finance blog where people had honest conversations about money. Dieker also teaches writing, freelancing and publishing classes and works one-on-one with authors as a developmental editor and copyeditor. Highlights Investigative and political journalism Delivered on-the-ground news Newscast Production Experience Dignelly is an Associate Editor for CreditCards.com where she is dedicated to updating information for readers. She obtained her master’s degree in broadcast and digital journalism from Syracuse University in New York. During that period, she gained a variety of experience from her time interning with Tampa Bay’s NBC News affiliate station WFLA-TV News Channel 8 and their Spanish digital news outlet Tampa Hoy. Dignelly’s interest in finance has brought her here to join our news and advice team from Puerto Rico. She is committed to keeping you informed and updated with the latest financial news and information. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Bankrate logo The Bankrate promise
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A is the maximum amount of money you are allowed to borrow from a line of credit. If you have a credit card with a $5,000 credit limit, for example, you can carry a balance of up to $5,000 on that card. What happens if you ? It depends on whether you’ve opted into what is commonly called “over-limit protection.” If you haven’t opted in, your credit card will be declined and the charge won’t go through. If you have signed up for over-limit protection, your charge might go through—but you might also get hit with an over-limit fee. Some people don’t realize that on unpaid balances also counts towards your balance (as do fees and penalty charges). You may think that you’ve only made $4,000 in purchases on a card with a $5,000 limit, for example, but if you’ve only been making the minimum payment each month, your credit card’s interest could start pushing you closer and closer to your credit limit. How much credit should you have
Credit card issuers in one of two ways: either they offer credit cards with predetermined credit limits (which means that everyone who gets accepted for the card is offered the same credit limit) or they give you a customized credit limit based on your and your credit score. Either way, the amount of credit available to you is probably going to reflect your current credit health. If you have bad credit, for example, you’re probably only going to be eligible for . If you have good or , you’ll probably be offered significantly higher lines of credit—and you can also request if issuers aren’t already boosting your credit limit on a regular basis. There’s no one answer to the amount of credit you “should” have. It’s a good idea to accept as much credit as lenders are willing to offer you, as long as you’re in a position to use that credit responsibly. How much credit should you use
Although it’s to your advantage to have as much credit as lenders are willing to give you, that doesn’t mean that you should use all of your available credit. In fact, using too much credit could hurt your credit score. Why? Because 30 percent of your credit score is determined by your . This ratio represents the amount of credit you have available to you versus the amount of credit you are currently using. For instance, if you have $10,000 in available credit and a $5,000 balance, your credit utilization ratio is 50 percent. To gauge whether your card balances are dampening your credit score, check out and take the next steps toward improving your financial opportunities. One of the best ways to is to lower your credit utilization ratio. A good rule of thumb is to keep your under 30 percent. This means that if you have $10,000 in available credit, you don’t ever want your balances to go over $3,000. If your balance exceeds the 30 percent ratio, try to pay it off as soon as possible; otherwise, your credit score may suffer. If you use a to track your credit score, you might notice that your credit score goes up or down by a few points every time you use or pay off your available credit. The bottom line
There’s no magic amount of credit that a person “should” have. Take as much credit as you’re offered, try to keep your credit usage below 30 percent of your available credit and pay off your balances regularly. With responsible use and better , you can maintain a good credit score. SHARE: Nicole Dieker has been a full-time freelance writer since 2012—and a personal finance enthusiast since 2004, when she graduated from college and, looking for financial guidance, found a battered copy of Your Money or Your Life at the public library. In addition to writing for Bankrate, her work has appeared on CreditCards.com, Vox, Lifehacker, Popular Science, The Penny Hoarder, The Simple Dollar and NBC News. Dieker spent five years as writer and editor for The Billfold, a personal finance blog where people had honest conversations about money. Dieker also teaches writing, freelancing and publishing classes and works one-on-one with authors as a developmental editor and copyeditor. Highlights Investigative and political journalism Delivered on-the-ground news Newscast Production Experience Dignelly is an Associate Editor for CreditCards.com where she is dedicated to updating information for readers. She obtained her master’s degree in broadcast and digital journalism from Syracuse University in New York. During that period, she gained a variety of experience from her time interning with Tampa Bay’s NBC News affiliate station WFLA-TV News Channel 8 and their Spanish digital news outlet Tampa Hoy. Dignelly’s interest in finance has brought her here to join our news and advice team from Puerto Rico. She is committed to keeping you informed and updated with the latest financial news and information. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Related Articles