Know your limit: Does your credit card limit match your budget?

When your circumstances change, it’s a good time to think about whether your credit card limit still works for you. Having too high a limit can end up costing you, as you may end up spending more and paying extra in interest costs if you can’t pay off your credit card balance in full each month.

Here are some signs you may want to consider having a lower credit limit:

• You can’t pay off your balance in full by the due date each month
• You sometimes use your credit card to make impulse buys you haven’t budgeted for
• You struggle to keep on top of your budget
• You’re finding it tough to meet a savings goal that you’ve set.

Everyone’s situation is different. To figure out the most appropriate credit card limit for you, consider:

Your budget is a key financial tool that helps you work out how much money you have left after paying essential expenses, e.g. power bills, rent, mortgage payments.

Review your budget to see how much you can afford to put towards your repayments. Remember, to avoid paying interest on your credit card purchases, you should aim to pay off your balance in full each month. 

If you don't have a budget, our free budget planner can help you create one.

Are you a saver or a spender? How disciplined are you?

If you sometimes make impulse buys, reducing your credit card limit can help you avoid temptation.

If your circumstances change, e.g. you’re temporarily out of work or your income has reduced, then you may want to consider reducing your credit limit.