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One of the first questions we tend to ask when approved for a credit card is: What's the credit limit? But putting that new limit in context can be difficult if you don't know what the average credit card limit actually looks like.
Is your new credit limit good? Is it subpar? And how important is having a high credit limit, anyway? We've answered some key questions about credit limits and found the average credit card limits for American cardholders.
Thanks to movies and songs that glorify the obscene credit limits of the rich and famous, many of us are inclined to lust after a high credit limit. In the real world, however, the average credit card limit is a lot more Schwinn than it is Ferrari. Thankfully, you don't need the ability to charge a new car on your credit cards -- just your car insurance.
That's not to say that your credit card limit isn't important, of course. Not only do you need to have a credit limit high enough to cover your expenses, your limit also plays an important role in your credit score. In particular, credit scoring formulas look at your credit utilization, which is the ratio of how much credit card debt you have versus how much credit you have available.
For example, if you have a credit limit of $1,000 and a card balance of $100, your utilization rate for that card is: $100 / $1,000 = 0.10, or 10%. Common wisdom is that you should keep your utilization rate below 30% to avoid credit score damage, but a rate in the single digits is typically closer to ideal. So, while you don't necessarily need a sky-high credit limit, a higher limit can help keep your utilization rate low.
The hardest part of figuring out how your credit limits stack up is that there's no definitive guide that all credit card companies use to set your limits. But though each card issuer has its own process, they all look at some of the same things when making a decision:
Since each issuer has its own ways to determine credit limits, it's impossible to predict what kind of limit you'll get when you apply for a new card. But, as you can see, the length of your credit history is an important factor -- and, according to the data, it's also a pretty good estimator. The numbers show a strong correlation between average credit card limits and age.
According to Experian data from the second quarter of 2019, the average credit card limit in America is $31,015. This is a $834 increase from 2018 and a $3,049 increase over the previous five years.
While average credit card limits have increased overall, the data also shows some more specific trends in credit limits when it came to age. Cardholders in the baby boomer generation are enjoying the highest credit limits, with Generation X coming in second. Unsurprisingly, the youngest generation -- Generation Z -- have the lowest credit limits, likely due to their limited credit histories.
Here's a look at how generation fared in Experian's report on average credit card limits (ages in parenthesis):
Although the data certainly supports the idea that your age -- and, thus, the length of your credit history -- plays a big role in your credit limits, something else can be extrapolated. The decrease in average credit card limits from the baby boomer generation to the silent generation may be a result of the impact of income on spending limits, as the oldest generation is mostly out of the workforce.
If you look at the average credit card limit and think your own cards aren't up to muster, don't worry. Unless you're seeing problems in your utilization, you probably don't need to give your credit limits much consideration.
However, if you are concerned about your utilization rate and think higher credit limits would be helpful, there are some things you can do:
Of course, there is also one final thing you can do to improve your credit limits: wait. As your credit history grows, you'll likely start to qualify for higher credit limits. Some card issuers may also increase your limits automatically if you maintain your credit card accounts in good standing.
It's all too easy to compare yourself with the average credit card limit, but that number is just that -- a number, and one that hides a lot of nuance and variables. Overall, it's more important to think of your credit limits in terms of how much available credit you really need, rather than how that limit compares to the average credit card limits of other cardholders.
Here are some other questions we've answered:
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