How To Get Money From Credit Card

Thinking about getting a new credit card? How to estimate your initial credit limit before you apply.

When you apply for a credit card, you could be declined. And even if you're approved, you don't know how much of a credit limit the bank will give you.

What Credit Limit Will I Get?

What are the average credit lines for new credit card accounts?

Credit limits vary greatly depending on your income, credit score, and existing debt.

While you cannot exactly predict your new credit line, here are some guidelines based on national averages. Credit card approval requirements vary widely and, in general, the better credit score required to get approved, the higher the initial credit limit will be.

Super prime credit limits

The average credit limit for all new super-prime credit card accounts was $11,143, according to a 2014 study by the American Bankers Association. Super prime credit cards are generally geared towards consumers with 10 or more years of excellent credit history. A super-prime credit score is at least 750, but usually north of 800.

Prime credit limits

The average credit limit for new prime credit cards was $7,086. Consumers who can qualify for prime credit cards usually have credit scores of at least 700, but usually between 740 and 800. Sometimes, consumers with credit scores in the high 600s may qualify for prime credit offers if you don't have a lot of pre-existing debt, but your credit limits will definitely be lower (for example, between $2,000 and $5,000).

Sub-prime credit limits

For sub-prime cards, the average credit limit was $3,500. Sub-prime credit is a broad category capturing everyone with credit scores in the mid-600s or lower, so this figure strikes me as misleading. Credit limits will tend to be much higher for consumers with higher credit scores, just on the edge of prime.

Applicants with recent credit problems or new to credit should not be surprised to only get with a credit limit of $1,000, $500 or even less when approved for a new sub-prime credit card account.

How credit card credit limits work

There are numerous factors that go into determining how much of a credit line a bank will extend to you on a new credit card account.

How do credit card issuers determine your credit limit?

Your credit limit is a reflection of what the credit card issuer thinks you can reasonably repay based upon your income and credit score.

When you apply for a credit card, the issuing bank will take into account the following factors when determining your credit line:

Your credit score
Your monthly income (self-reported)
Your monthly rent or mortgage payment (self-reported)
Your existing credit lines and balances
Your employment history
Your address history

Your credit score and monthly cash flow are the most important factors in determining the credit limit on a new credit card. Two people with the exact same credit scores may get very different credit lines depending upon their reported income and expenses.

For the most part, the more money you earn, the more credit a bank will extend to you.

Do credit card issuers verify my income?

Usually, no. Credit card banks make their decision solely upon the income and expense information you provide.

When you apply for a large loan, the bank will ask for proof of your income from pay stubs, W-2 forms or copies of your tax returns. Because the credit limits on credit cards are usually lower than a car loan or a mortgage, the issuing banks usually do not go through the hassle of asking for income documentation—they just ask.

So why does the bank trust you? What's to stop you from saying you earn $100,000 a year when you only earn $20,000?

It's because the bank is simply covering its butt. The bank doesn't want to be accused of maliciously lending you money you can't afford to repay, so it asks you for your income. Let's say that you default on your credit card debt and the bank has to take you to court. If you could, in fact, prove to a judge that the bank lent you money it knew you couldn't repay, you might be able to get out of the debt. If, however, the bank can provide written proof that you stated your income was at a certain level, the judge will find you responsible for paying the debt—regardless of your actual income.

Bottom line: Don't lie about your income on credit applications!

What's the highest credit limit I might get?

Based on my own experience, I've seen new credit card accounts issued with credit limits between $10,000 and $15,000. That's for consumers with credit scores above 720 and very healthy incomes.

Over time, credit limits can get much higher—I now have an American Express credit line that's over $30,000, and I'm sure they can get much bigger. But most issuers won't give you that as soon as you apply for a brand new card until you've proven you're a responsible customer over a few years.

Some issuers—notably, Amex and Discover—are rumored to be more generous with credit limits because they target very creditworthy applicants.

Why didn't I get a higher credit limit?

Some reasons you may have gotten a lower credit limit than you expected include too high of a debt-to-income ratio, too many recent credit inquires, or too many open accounts with the same bank.

Even if you have an excellent credit score, you may not receive as high of a credit limit as you would've wanted when you apply for a new credit card.

Because credit limits are based upon what the bank thinks you can reasonably repay, the more debt you have as a percentage of your income, the more credit you might be granted.

For example, let's say Mark and Molly both earn $100,000 a year. Both have credit scores around 750 and no recent credit inquires or negative marks. The only difference between Mark and Molly is their debt levels.

Molly has no debt—she pays $500 in rent to her roommate and, although she has open credit cards, she never uses them.

Mark has a $1,500 monthly mortgage payment mortgage and shows a $5,000 credit card balance. Even though Mark pays off the credit card balance every month in full, that balance still shows up on his credit report as active debt.

Both applicants apply for and are approved for a new credit card. Molly gets a $9,000 credit limit but Mark only gets a $3,000 credit limit.

Another factor that can influence your credit limit is when you have multiple cards with the same issuer. For example, many people carry both the Chase Sapphire Preferred® Card and the Chase Freedom Unlimited® to take advantage of transferring points between them to maximize rewards.

It's possible to have several, even dozens of credit cards with one bank, but the more cards you get, the lower your limit on each card may be. That's because even though you have several different credit card, you're getting credit from a single bank. At some point, it will look to limit its exposure in the event you can't pay them back.

Will I get the credit limit I need to transfer a balance?

Sometimes, you apply for a balance transfer credit card only to find out your new credit limit won't cover the entire balance you want to pay off.

For example, you want to transfer a $5,000 credit card from a 15% APR card to a card with a 0% intro APR for 18 months. Unfortunately, the new card only gives you a $4,000 credit limit.

Related: See how much you might save with our balance transfer calculator

If you requested the balance transfer at the time of application, the transfer will still be processed—$4,000 of your old balance will move to the new card. That leaves you $1,000 you'll still need to pay off on the old higher-APR card.

While getting a no-interest balance transfer on some debt is better than continuing to pay a higher rate, you may want to know how much you'll be able to transfer before committing. In that case, simply apply for the balance transfer card you want but do not complete the balance transfer request section.

Once you're approved and know your credit limit, you can call to request the transfer. Most of the best balance transfer credit cards will honor their 0% intro APRs on balance transfers as long as you initiate the transfer within a month or two of opening the account—read the card terms carefully before you apply.

Summary

When you apply for a new credit card, you don't know how much of a credit line the bank will offer. You can't exactly predict a credit limit, but you can look at averages.

Most creditworthy applicants with stable incomes can expect credit card credit limits between $3,500 and $7,500. High-income applicants with excellent credit might expect a credit limit of up to or more than $10,000. Sub-prime applicants—those new to credit or with poor credit scores—should prepare for new credit limits of less than $1,000.

What credit score do you need to be approved for a credit card?
Should you do a balance transfer?

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