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Know your limit

Used in the right way, credit cards can be a beneficial way to borrow, giving you access to funds that can help you out in the short term. Of course, these funds are capped, and while it's important to know what your credit card limit is, it's even more important to have a clear idea of what you can personally afford to borrow.

What is a spending limit?

Every credit card comes with a spending limit – that is, the amount of money you are able to borrow. When you're accepted for a credit card, your limit is calculated by your provider. This is based on your personal circumstances, and takes into account a variety of factors such as your salary and credit rating. You can spend up to that limit, but if you go over it you could face high interest rates and charges.

Spend wisely

A credit card can be a secure way to spend, and can provide a number of benefits. However, it's important to take account of your own personal situation and assess if a credit card is right for you: are you able to stay within the credit card limit given by your lender? If not, you could face high interest rates and late payment fees. Permanently living in the top end of your credit limit may not be a comfortable position to be in, so always remember that the money you'll borrow will have to be paid back.

Budget matters

Credit card budgeting can be key to financial success – and less stress. A budget can help you to spend within your means, stay below your credit limit and allow you to meet monthly payments. If you don't budget and end up making late payments you will be charged a fee on top of the interest on the amount you owe. Missed payments can affect your credit rating too, and make lenders less likely to grant you loans, cards or mortgages.

An easy way to avoid this is to set up a direct debit. When it comes to how much you should pay off your credit card each month, consider your options: pay the monthly balance in full and you will avoid interest charges. Lenders charge interest on the card's total amount, so if you don't pay the balance in full you could still be paying interest.

In the red

Missing monthly payments or going over your credit card limit could lead to high interest rates and fees. If you start to struggle with credit card repayments, you can contact your bank or card issuer and talk to them about an alternative payment plan that will help you get back on track. Take a look at your statements and spending habits, and assess where you can cut back to ensure you can afford your payments.

Increasing your limit

If you want to increase your credit card limit, contact your card issuer to make the request. They will look at your credit history and respond. If you have exceeded your current limit or are prone to missed payments they're more likely to say no. For a lender to increase your credit card limit you'll need to be a credit-worthy candidate, so show that you can consistently meet payments and this should help your application. It's a good idea to consider why you want to increase your limit too – and be sure you can afford it.