How do credit limits work in Ireland?
Your credit limit restricts how much you can borrow on your credit card. Here’s what you need to know about credit card limits and how to use your card responsibly to get better credit.
What is a credit limit?
Your credit limit is the maximum amount you can borrow on your credit card at any one time.
For example, if your credit limit is €1,500 you can owe up to that amount on your card before incurring extra charges. When you apply for a credit card:
How is your credit limit calculated?
When you apply for a credit card, your bank or credit card issuer will check your credit history to help decide whether to approve your application and what your credit limit will be.
You can find out about your credit record in our guide How to check your credit record.
Credit limits are also based on other factors including:
- Income and outgoings e.g salary income and regular expenditure
- Existing credit commitments e.g. other loans, overdrafts, credit cards
- Credit score e.g. your repayment and previous borrowing history
Each bank or card issuer has its own lending policy, but all use the Central Credit Register to check your credit history.
How do you increase your credit limit?
If you want to increase your credit limit you can make a request to your credit card provider, but you may need to complete a fresh application and check your credit record.
Managing your existing credit responsibly can help build your credit score and improve your chances of being approved for a bigger credit limit.
After you’ve demonstrated that you can reliably make repayments for up to six months, it is worth asking your card issuer to increase your credit limit.
Why do banks reduce credit limits?
Your credit limit may be reduced for several reasons. It could be because:
- the bank thinks you may not be able to pay your balance
- there’s been a change to the products your bank provides
- there’s been a change in regulations
Your bank or credit card provider will inform you by email or letter. The limit decrease will also show on your online account or banking app immediately where you’ll see your spending limit.
A reduced credit limit may impact your overall available credit and negatively impact your credit score.
What happens if you go over your credit limit?
If you spend more than your credit limit, your bank or card issuer will charge you an overlimit fee.
This fee varies between providers and will be applied every month you exceed your credit limit. For example, it’s €12.70 with An Post, and €7.00 with AIB.
You could also lose any promotional rates you have and it will affect how the bank views your ability to repay.
Exceeding your credit limit will also have a negative effect on your credit rating, which could make future borrowing more expensive or harder to get.
Can you decrease your own credit limit?
Yes, you can request a decrease in your credit limit, as long as your new limit isn’t below the balance still outstanding on your account.
Also, bear in mind that lenders prefer to see you stay well within your credit limit, so lowering it may make you look less creditworthy to future lenders.
Do credit limits affect your credit record?
Your credit limit will not affect your credit score, but your spending behaviour within the limit may affect your credit history if you fall behind on repayments.
Lenders view you more favourably if you stay well within your credit limit. It’s suggested a good threshold is around 25% of your credit limit each month.
If you go over your credit limit on a regular basis or miss repayments, your record may well affect your credit score.
Is your credit rating affected if you go over the limit?
It depends on the card issuer and whether they report it to the Central Credit Register (CCR). If it is a one-off occurrence and the breach is quickly rectified it is unlikely to affect your credit score; however, you will be charged an overlimit fee.
However, if you repeatedly exceed your credit limit, it is viewed as a red flag by your lender. If you default on your payments, the CCR will be notified and your credit score will be negatively affected.