When it comes to credit cards, bigger isn’t always better. While some consumers may look for flashy cards with bells, whistles, and sky-high credit limits, others may prefer to throttle temptation by maintaining a lower credit limit.
With a low-limit credit card, you can rest assured that you’ll have access to credit in case of emergency or necessity (such as when you want to rent a car), but you won’t have the temptation of overspending yourself into debt.
Here are some of the best credit cards with low initial credit limits.
Best Overall | Bad Credit | No Credit | Student | Secured | Prepaid | FAQs
Best Overall Low-Limit Credit Cards
Some of our top choices for low-limit credit cards may require a good credit score or better. Your credit rating will often determine your initial credit limit, but if you want to keep your spending levels low, you can contact the issuer to request a lower limit after you’re approved.
This request is one of the many credit cardholder’s rights that you have, but may not know about. You can also deny future credit limit increases to keep your limit the same for as long as you like.
1. Discover it® Cash Back — $300+ Credit Limit
The Discover it® Cash Back card provides one of the top cash back rewards programs in the credit card space, thanks to its quarterly rotating bonus categories.
4.9
- INTRO OFFER: Unlimited Cashback Match for all new cardmembers–only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300.
- Earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases—automatically.
- Redeem your rewards for cash at any time.
- Apply and you could get a decision in as little as 60 seconds.
- Discover could help you reduce exposure of your personal information online by helping you remove it from select people-search sites that could sell your data. It’s free, activate with the mobile app.
- Get a 0% intro APR for 15 months on purchases. Then 18.24% to 28.24% Standard Variable Purchase APR applies, based on credit worthiness.
- No annual fee.
- Terms and conditions apply.
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
0% Intro APR for 15 months
|
0% Intro APR for 15 months
|
18.24% - 28.24% Variable APR
|
$0
|
Excellent/Good
|
Credit limits on this card typically start around $2,000, but some cardholders report starting with a credit limit between $300 and $500.
2. Chase Freedom Unlimited® — $500+ Credit Limit
With the Chase Freedom Unlimited®, you have access to Chase Ultimate Rewards, one of the most robust rewards programs in the credit card space. This Visa card has slightly higher acceptance standards, but initial credit limits can be low. Some reviewers report starting off with a spending limit of $500.
4.9
- INTRO OFFER: Earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) - worth up to $300 cash back!
- Enjoy 6.5% cash back on travel purchased through Chase Travel℠, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more; 4.5% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and 3% on all other purchases (on up to $20,000 spent in the first year).
- After your first year or $20,000 spent, enjoy 5% cash back on travel purchased through Chase Travel℠, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1.5% cash back on all other purchases.
- No minimum to redeem for cash back. You can choose to receive a statement credit or direct deposit into most U.S. checking and savings accounts. Cash Back rewards do not expire as long as your account is open!
- Enjoy 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 20.49% - 29.24%.
- No annual fee – You won't have to pay an annual fee for all the great features that come with your Freedom Unlimited® card
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
0% Intro APR on Purchases 15 months
|
0% Intro APR on Balance Transfers 15 months
|
20.49% - 29.24% Variable
|
$0
|
Good/Excellent
|
Be sure to examine the perks associated with each card before you decide which offer you want to apply for. While cash back or travel points may sound nice on the surface, you may end up paying for those benefits through higher interest rates or annual fees.
You can find all of the terms associated with each card in the credit card disclosure statement on each issuer’s website. Most issuers include these statements on the application page.
3. Discover it® Miles — $1,000+ Credit Limit
4.8
- UNLIMITED BONUS: Unlimited Mile-for-Mile match for all new cardmembers—only from Discover. Discover gives you an unlimited match of all the Miles you’ve earned at the end of your first year. You could turn 35,000 Miles to 70,000 Miles. There’s no signing up, no minimum spending or maximum rewards. Just a Miles-for-Miles match.
- Automatically earn unlimited 1.5x Miles on every dollar of every purchase
- No annual fee
- Turn Miles into cash. Or redeem as a statement credit for your travel purchases like airfare, hotels, rideshares, gas stations, restaurants and more.
- 0% intro APR for 15 months on purchases. Then 18.24% - 28.24% Standard Variable Purchase APR will apply.
- Discover could help you reduce exposure of your personal information online by helping you remove it from select people-search sites that could sell your data. It’s free, activate with the mobile app.
- Discover is accepted nationwide by 99% of the places that take credit cards.
- Terms and conditions apply.
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
0% Intro APR for 15 months
|
0% Intro APR for 15 months
|
18.24% - 28.24% Variable APR
|
$0
|
Excellent/Good
|
Unlike the Cash Back card, the starting credit limit for the Miles offering is a tad higher, with a reported minimum credit limit of $1,000.
Best Low-Limit Credit Cards for Bad Credit
If your credit isn’t as strong as you want it to be, a good low-limit credit card could be your ticket to improvement. By keeping your balances low and always paying your bill before it’s due, you could see gradual increases in your credit score — which can improve the type of credit you’re offered in the future.
Depending on how low your credit score is, you may find that a secured credit card is your best option for rebuilding credit. While these cards require a refundable security deposit to open your account, you can set your own credit limit based on your deposit amount.
4. Capital One Platinum Secured Credit Card — $200 Credit Limit
With the Capital One Platinum Secured Credit Card, you don’t have to worry about your credit limit — because every approved cardholder starts with a $200 spending cap.
4.6
- No annual or hidden fees. See if you're approved in seconds
- Building your credit? Using the Capital One Platinum Secured card responsibly could help
- Put down a refundable security deposit starting at $49 to get a $200 initial credit line
- You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
- Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
- Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
N/A
|
N/A
|
29.99% (Variable)
|
$0
|
Limited, Bad
|
While most secured credit cards require a refundable security deposit that matches your credit limit, Capital One has a variable deposit policy that’s based on your credit score. Depending on your credit profile, Capital One will require a $49, $99, or $200 deposit.
5. Total Visa® Card — $300 Credit Limit
Every new Total Visa® Card comes with a $300 spending limit, regardless of your credit history. This is an unsecured credit card, meaning there is no deposit required for activation. You will, though, have to pay a $75 annual fee at activation, which immediately drops your spending limit to $225 until you pay for the charge.
4.3
- Earn 1% cash back rewards on payments made to your Total Credit Card
- Checking Account Required
- $300 credit limit (subject to available credit)
- No security deposit, simply pay a one-time $95 program fee to open your account.*
- User friendly Mobile App.
- *See Rates, Fees, Costs & Limitations for complete offer details
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
N/A
|
N/A
|
35.99%
|
See Terms
|
Fair, Bad Credit
|
While low-limit credit cards can reduce your temptation to spend, some cards designed for consumers who have poor credit may include annual fees, setup fees, and other charges. The issuer charges these fees to your new card as soon as you activate it, which can lower your initial available balance until you pay them off.
Best Low-Limit Credit Cards for No/Limited Credit
Most low-limit credit cards are perfect for people who are new to building credit and don’t have enough history to generate a credit score. A card with a low limit allows you to get your feet wet using credit, and accumulate enough payment history to establish a credit score.
You may even find some valuable perks, including cash back or premium security features, when browsing our top choices below.
6. Capital One Platinum Credit Card — $300+ Credit Limit
With the Capital One Platinum Credit Card, you will start with at least a $300 credit limit, but you can possibly increase your limits after your first five on-time payments.
4.7
- No annual or hidden fees. See if you're approved in seconds
- Be automatically considered for a higher credit line in as little as 6 months
- Help build your credit through responsible use of a card like this
- Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
- Monitor your credit score with CreditWise from Capital One. It's free for everyone
- Get access to your account 24 hours a day, 7 days a week with online banking from your desktop or smartphone, with Capital One's mobile app
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
N/A
|
N/A
|
29.99% (Variable)
|
$0
|
Average, Fair, Limited
|
Capital One requires all applicants to have limited credit — at the very least — to be eligible for approval for this entry-level card.
7. Capital One QuicksilverOne Cash Rewards Credit Card — $300+ Credit Limit
The Capital One QuicksilverOne Cash Rewards Credit Card offers a minimum credit limit of $300 and a host of perks, such as Eno Capital One assistant, automatic credit line reviews, and CreditWise credit monitoring.
4.6
- Earn unlimited 1.5% cash back on every purchase, every day
- No rotating categories or limits to how much you can earn, and cash back doesn't expire for the life of the account. It's that simple
- Be automatically considered for a higher credit line in as little as 6 months
- Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
- Help strengthen your credit for the future with responsible card use
- Earn unlimited 5% cash back on hotels and rental cars booked through Capital One Travel, where you'll get Capital One's best prices on thousands of trip options. Terms apply
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
N/A
|
N/A
|
29.99% (Variable)
|
$39
|
Average, Fair, Limited
|
This is a great option for anyone who wants to earn cash back on their spending with the opportunity to increase their credit limit with a pattern of on-time payments.
Best Low-Limit Credit Cards for Students
College is the perfect time to start establishing a credit history. With a good low-limit student credit card, like those listed below, you can maintain access to credit while avoiding the temptation to overspend.
Plus, maintaining a low limit means that you won’t carry debt beyond graduation and into your first job.
8. Discover it® Student Cash Back — $500+ Credit Limit
The Discover it® Student Cash Back starts with a minimum credit limit of $500 and features the ability to earn cash back on all of your eligible purchases.
4.8
- INTRO OFFER: Unlimited Cashback Match for all new cardmembers – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! So you could turn $50 cash back into $100. Or turn $100 cash back into $200. There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match.
- Earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases—automatically.
- Redeem your rewards for cash at any time.
- No credit score required to apply.
- Discover could help you reduce exposure of your personal information online by helping you remove it from select people-search sites that could sell your data. It’s free, activate with the mobile app.
- No annual fee and build your credit with responsible use.
- 0% intro APR on purchases for 6 months, then the standard variable purchase APR of 18.24% - 27.24% applies.
- Terms and conditions apply.
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
0% Intro APR for 6 months
|
10.99% Intro APR for 6 months
|
18.24% - 27.24% Variable APR
|
$0
|
Fair/New to Credit
|
Your account will transfer over to a traditional Discover card after graduation, which allows you to keep your cash back earnings.
9. Discover it® Student Chrome — $500+ Credit Limit
The Discover it® Student Chrome also starts with a minimum $500 credit limit. Although the card doesn’t have “Cash Back” in the name, you’ll still earn cash back on every purchase made with the card.
4.7
- INTRO OFFER: Unlimited Cashback Match for all new cardmembers – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! So you could turn $50 cash back into $100. Or turn $100 cash back into $200. There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match.
- Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus earn unlimited 1% cash back on all other purchases.
- Redeem your rewards for cash at any time.
- No credit score required to apply.
- Discover could help you reduce exposure of your personal information online by helping you remove it from select people-search sites that could sell your data. It’s free, activate with the mobile app.
- No annual fee and build your credit with responsible use.
- 0% intro APR on purchases for 6 months, then the standard variable purchase APR of 18.24% - 27.24% applies.
- Terms and conditions apply.
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
0% Intro APR for 6 months
|
10.99% Intro APR for 6 months
|
18.24% - 27.24% Variable APR
|
$0
|
Fair/New to Credit
|
This card allows you to earn cash back without keeping track of rotating bonus categories that need to be activated four times a year.
Best Secured Low-Limit Credit Cards
In many ways, secured credit cards are the ultimate low-limit credit cards. That’s because you determine your credit limit based on the refundable security deposit you make. There are several secured cards that can accommodate your needs, whether you want a limit of $200 or $2,000.
Some cards won’t even require a credit check for approval, which helps if your credit score isn’t the greatest, but you’re determined to improve it.
10. Capital One Platinum Secured Credit Card — $200 Credit Limit
If you’re approved for the Capital One Platinum Secured Credit Card, you’ll start with a $200 spending limit after paying a refundable security deposit of either $49, $99, or $200 — depending on your credit history.
4.7
- No annual or hidden fees. See if you're approved in seconds
- Building your credit? Using the Capital One Platinum Secured card responsibly could help
- Put down a refundable security deposit starting at $49 to get a $200 initial credit line
- You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
- Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
- Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
N/A
|
N/A
|
29.99% (Variable)
|
$0
|
Limited, Bad
|
Capital One considers all cardholders for credit line increases — though you can reject an increase if you want to — after five months of on-time payments. Spending limit increases won’t require an additional deposit. Capital One is among the best secured credit card issuers out there.
11. Discover it® Secured Credit Card — $200+ Credit Limit
Like all secured credit cards, the Discover it® Secured Credit Card requires a refundable security deposit for approval, with your deposit amount matching your spending limit.
4.7
- No credit score required to apply.
- No Annual Fee, earn cash back, and build your credit history.
- Your secured credit card requires a refundable security deposit, and your credit line will equal your deposit amount, starting at $200. Bank information must be provided when submitting your deposit.
- Automatic reviews starting at 7 months to see if we can transition you to an unsecured line of credit and return your deposit.
- Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus earn unlimited 1% cash back on all other purchases.
- Discover could help you reduce exposure of your personal information online by helping you remove it from select people-search sites that could sell your data. It’s free, activate with the mobile app.
- Get an alert if we find your Social Security number on any of thousands of Dark Web sites. Activate for free.
- Terms and conditions apply.
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
N/A
|
10.99% Intro APR for 6 months
|
28.24% Variable APR
|
$0
|
New/Rebuilding
|
This card is a good choice for a low-limit secured card — especially when you consider the ability to earn cash back on every purchase you make.
12. OpenSky® Secured Visa® Credit Card — $200+ Credit Limit
Like many secured credit cards, the OpenSky® Secured Visa® Credit Card requires a minimum security deposit of $200 for approval. But you can pay more if you’re looking for a higher spending limit. If you want a card that helps you stick to your budget and doesn’t offer the temptation to spend, this secured Visa credit card may be a good option for you.
4.8
- New feature! Earn up to 10% cash back* on everyday purchases
- No credit check to apply. Zero credit risk to apply!
- Looking to build or rebuild your credit? 2 out of 3 OpenSky cardholders increase their credit score by an average of 41 points in just 3 months
- Get free monthly access to your FICO score in our mobile application
- Build your credit history across 3 major credit reporting agencies: Experian, Equifax, and TransUnion
- Add to your mobile wallet and make purchases using Apple Pay, Samsung Pay and Google Pay
- Fund your card with a low $200 refundable security deposit to get a $200 credit line
- Apply in less than 5 minutes with our mobile first application
- Choose the due date that fits your schedule with flexible payment dates
- Fund your security deposit over 60 days with the option to make partial payments
- Over 1.4 Million Cardholders Have Used OpenSky Secured Credit Card To Improve Their Credit
- *See Rewards Terms and Conditions for more information
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
N/A
|
N/A
|
25.64% (variable)
|
$35
|
Poor
|
Keep in mind that your security deposit will be refunded when you close your account, as long as the account remains in good standing with no outstanding balance. If you cancel your card while you have a balance, the issuer may deduct the money you owe from your deposit before refunding any remaining funds.
Best Prepaid Low-Limit Credit Cards
Prepaid credit cards don’t act like traditional credit cards. That’s because these cards only allow you to spend whatever funds you pre-load on them. Once you spend the money, you won’t be able to charge anything further until you load more funds onto the card.
That’s different from a secured card, which provides a revolving credit line that allows you to use the credit again once you’ve paid it off.
13. Pink Netspend® Visa® Prepaid Card — Self-Determined Limit
Since the Pink Netspend® Visa® Prepaid Card isn’t a credit card, you won’t actually receive a spending limit. Instead, the card limits your spending power to whatever cash balance you have deposited into your card’s linked account.
4.8
- With Direct Deposit, you can get paid faster than a paper check.
- No late fees or interest charges because this is not a credit card.
- Use the Netspend Mobile App to manage your Card Account on the go and enroll to get text messages or email alerts (Message & data rates may apply).
- Card use is subject to activation and ID verification. Terms and Costs apply.
- Card issued by Pathward N.A., Member FDIC. Card may be used everywhere Visa debit card is accepted.
- See additional NetSpend® Prepaid Visa® details.
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
N/A
|
N/A
|
N/A
|
Variable Monthly Fee
|
Not applicable
|
Netspend doesn’t have a minimum account balance, but it can charge some pretty hefty fees — so be aware of what you can (and can’t) do for free to avoid draining your balance.
14. Netspend® Visa® Prepaid Card — Self-Determined Limit
Like its sibling card listed above, the Netspend® Visa® Prepaid Card doesn’t require a minimum balance, which means you can only spend the money you have loaded onto the card.
4.7
- With Direct Deposit, you can get paid faster than a paper check.
- No late fees or interest charges because this is not a credit card.
- Use the Netspend Mobile App to manage your Card Account on the go and enroll to get text messages or email alerts (Message & data rates may apply).
- Card use is subject to activation and ID verification. Terms and Costs apply.
- Card issued by Pathward N.A., Member FDIC. Card may be used everywhere Visa debit card is accepted.
- See additional NetSpend® Prepaid Visa® details.
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
N/A
|
N/A
|
N/A
|
Up-to $9.95 monthly
|
Not applicable
|
Netspend doesn’t require a credit check for approval, but since this isn’t technically a credit card, it won’t help you improve your credit score, either.
15. Brink’s Armored™ Account — Self-Determined Limit
The Brink’s Prepaid Mastercard® does not have a minimum balance requirement, but it oddly states a maximum $15,000 balance for the card. If you have that much money loaded on your card, you’re likely best served putting it into an account that will earn you interest — such as a savings, checking or certificate of deposit (CD) account.
4.8
- Brink’s knows Security! 24/7 access to a suite of security benefits to help keep your account armored.
- Get access to over 100,000 Brink’s Money ATMs.
- Get paid faster than a paper check with direct deposit.
- Add funds to your Brink’s Armored Account and use Brinks Armored debit card anywhere Debit Mastercard is accepted.
- Account opening is subject to registration and ID verification. Terms & fees Apply. Deposit Account is established by Pathward®, N.A., Member FDIC.
|
Intro (Purchases)
|
Intro (Transfers)
|
Regular APR
|
Annual Fee
|
Credit Needed
|
|---|---|---|---|---|
N/A
|
N/A
|
N/A
|
Variable Monthly Fees
|
Not applicable
|
Some prepaid cards function like debit cards, which won’t help you if you’re looking to improve your credit score. You should make certain that you understand how any card you apply for works, and make sure that it meets your needs and can help you reach your goals.
What is the Lowest Limit on a Credit Card?
This depends greatly on the type of credit card you apply for.
Most consumers find the lowest credit limits on secured and retail store credit cards. Your initial security deposit will determine the limit on most secured cards. These cards work if you want to keep your limits low because you decide your limit without any bank input.
But that also means that you have to place a refundable security deposit to get your card. That can defeat the purpose of obtaining credit for some consumers. If you’re a regular shopper at a specific retail store or chain, you can often find low limits on store-branded cards.
That’s because many retailers don’t want to take on the risk associated with issuing higher limits. These cards also often feature higher interest rates and fewer perks, so keep that in mind if you tend to carry a balance from month to month or if you’re looking for cash back or other benefits.
If your credit score isn’t a factor, the best way for you to obtain a low-limit credit card may be to work backward — that means getting the card that you want and then lowering the limit afterward.
Banks determine credit card limits based on your credit score and submitted income information. Very few card issuers allow you to request a specific initial credit limit, but you can adjust it after approval.
For most cards, that means a simple call to the bank or issuing company to request a lower limit once your card arrives. Most credit limit adjustments will take effect immediately.
While this tactic may work to limit your spending temptation, it could have an impact on your credit score. Approximately 30% of your credit score relies on your current credit utilization. You can calculate your utilization by dividing your current balance by your overall credit limit.
For example, a card with a $1,000 limit and a $250 balance has a 25% utilization rate. When you have a high rate, banks may see you as a greater risk. Lower rates show responsibility and a habit of paying bills on time.
If you have a low-limit credit card with an overall limit of $200, a small purchase of $40 can instantly put you at 20% utilization until you pay your balance. So make sure that you pay your bills in full and on time if you maintain a low-limit credit card.
What is the Easiest Credit Card to Get?
Some secured credit cards don’t even require a credit check for approval. It can’t get much easier than that. But that means that you’ll have to place a refundable security deposit to establish your credit limit. That may not work for you.
Unsecured credit cards don’t require a deposit, but have higher standards for approval. Most card issuers don’t publish their minimum requirements for approval, which can make it difficult to decide between the dozens of cards that may interest you.
But if you use a prequalifying application, you could get a better idea of your approval chances without damaging your credit.
Every time you apply for any type of credit — a loan, credit card, mortgage, etc. — the lender places an inquiry to one or all three of the major credit reporting bureaus to get access to your credit file. Banks refer to these as hard inquiries.
A lender may not care if it sees one or two inquiries on your credit report. But a bank will certainly take notice as that number increases. Banks see multiple inquiries as a sign of desperation. They may think that you’ve exhausted your credit options and need more credit to stay afloat, or that several other banks have already turned you down.
Credit reporting bureaus tend to allow two or three hard inquiries in a two-year period. But after that, each inquiry lowers your credit score. The more inquiries you accrue, the bigger the hit you take.
Meanwhile, a prequalifying application initially relies on a soft inquiry. These applications look at your basic financial information to decide if you’re a good or bad candidate for their card.
A prequalifying approval doesn’t guarantee that you’ll get the card if you formally apply, but it does greatly improve your chances.
Once you decide to formally apply for a card, the lender will issue a hard inquiry to verify the information they have on file. But, by prequalifying, you’ve limited the number of applications you’ll need to submit, thus lowering your number of hard inquiries.
Why Are My Credit Card Limits So Low?
The bank that issues your credit card dictates the size of your credit limit. To determine the amount you’ll receive, the bank will look at your credit history, current debt load, income information, and several other factors — some of which are proprietary to the banks and unknown to consumers.
A single issue with any of those factors can drastically lower your credit limit — or cause an outright application rejection. Even people with excellent credit get rejections.
You can also find yourself with a lower limit if you have no reported information related to your credit history. Banks call these consumers credit invisible — meaning that their credit history is so limited that they cannot generate a reliable credit score.
Banks see credit invisible consumers as risks because they cannot predict their repayment behavior. To mitigate those risks, a bank will often start these cardholders with a low initial credit limit.
Credit cards, like any other kind of loan, are all about risk. Banks want to lend money or extend credit to people who they think are likely to pay them back.
If a lender feels you’re too much of a risk, they will likely decline your application. If you’re a medium risk, they may approve you with a low limit until you prove your creditworthiness.
By providing that lower limit, they lessen their risk. After all, would you rather have someone stiff you on a $2,000 loan or a $200 loan?
But your credit limit isn’t set in stone. Once you’ve recorded five or six months of on-time payments, you can contact your issuer to ask for a credit limit increase. Some issuers do this over the phone and others have brief forms online that give an instant credit decision.
Some banks also automatically monitor accounts to see if you’re eligible for a credit limit increase. If the bank finds that you are, it will automatically boost your limit and notify you by email or letter.
Before you request a credit limit increase, make sure your balance is low and your bills are all current. Most credit card issuers allow one credit limit increase every six months, so make your attempt count.
Do Low Limit Cards Hurt Credit?
They can if you don’t pay your balance off each month. With a small limit, it’s easy to have a high credit utilization ratio, which accounts for 30% of your FICO Score.
Your utilization ratio is the percentage of your balance compared to your card’s limit. For example, a card with a $300 limit and a balance of $100 has a 33% credit utilization rate.
High utilization ratios hurt your credit scores, and those with the best credit generally have a utilization ratio below 10%.
But if you consistently pay your bill on time and in full each month, the low limit won’t hurt your credit.
Does Closing Old Credit Card Accounts Impact My Score?
If you pay off the balance on an older credit card account, you may be tempted to just close it so you aren’t tempted to use it. That could be the right move if you have a history of being unable to control your spending. But if you can stow the card away and not use it, your credit score will benefit.
Keeping an old credit card account open (especially with no balance) can buoy your credit score in two ways. First, it contributes to the length of your credit history, showing credit bureaus that you have managed your finances for a longer period of time.
Second, it can help keep your credit utilization ratio down, as the credit limit on the card is part of your overall limit used to calculate CUR.
Low-Limit Cards Can Teach You to Use Credit Responsibly
Whether you’re new to credit, looking to repair past mistakes, or are a student who wants to learn about credit, maintaining a low limit can help you reach your goals without making mistakes that you may regret later.
Just like the moral in the story of the tortoise and the hare, slow and steady will win the credit race. That means keeping your credit limit — and your balance — low until you’re in a position where you can confidently increase it.
And when you do increase it, you’ll know that you have the discipline, and financial wherewithal, to keep your spending to a minimum — and your credit score to a maximum.
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