The idea of credit limits is common knowledge. What’s not commonly known is what goes into determining your credit limit. Jeff, our reader, is looking to find out. Follow along as our expert, Mubina, breaks it all down for him.
The question
I’m confused. I’ve been approved for two different credit cards. One credit card company offered me $7,500, the other $1,500. Why such a difference? What factors do banks take into account when they’re assigning a credit limit?
Jeff R.
The answer
Dear Jeff,
Your confusion about getting two very different credit limits is totally normal. Getting approved for a $7,500 limit on one credit card and only $1,500 on another can feel puzzling. The good news? Both offers mean you have decent credit. Let’s break down why this happens.
What determines credit limits?
When you apply for a credit card, each card issuer looks at different things. It’s definitely not random. Banks follow internal processes and guidelines to decide how much credit to give you. Think of it like this: each credit card company is like a different bank manager. They all look at your money situation, but they focus on different parts. One might care more about one’s income. Another might put more emphasis on your credit score.
Credit score
Your credit score is most definitely the biggest factor. Someone with a strong credit score represents a low-risk opportunity for the bank. They’re rewarded with a higher credit limit because they’re more likely to pay their bills on time. Most credit bureaus in Canada rate scores from 300 to 900. If your score is 670 or higher, you’re in good shape. The higher your score, the more available credit companies will offer. Credit score, in turn, depends on factors like timely payment of bills and credit utilization ratio. This shows how much credit you use compared to your total available credit.
Let’s say you have two cards:
Card 1: $7,500 limit with $1,000 balance
Card 2: $1,500 limit with $500 balance
Your total credit is $9,000, and your balance is $1,500. That means your utilization rate is about 17%, which is good. Ideally, keep your credit utilization ratio under 30% on each card.
Income level
Financial standing and income levels are other important factors. Your income tells lenders if you can pay back what you borrow or if the amount of credit you’re taking on may not be prudent when compared to your income. Some cards require a minimum income. Premium cards may require $60,000 or more per year.
Credit history length
How long you’ve had credit matters. If you’re new to credit cards, expect lower limits. Credit card companies trust people who have used credit well for years. Your credit report shows how long you’ve had each account. A longer history usually means bigger credit lines.
Current debt levels
Banks look at how much debt you already have. If your other credit card account balances are high, new issuers might be careful. Your debt-to-income ratio matters too. If you already owe a lot compared to what you earn, expect lower limits.
Why do different credit card issuers offer different amounts
Each credit card issuer has its own rules. Some are more generous with new customers. Others are very careful.
Here’s what makes the difference:
Bank policies – Some banks naturally offer higher starting limits
Card type – Premium cards usually have higher minimums
Target customers – Some cards focus on people with excellent credit, others on higher incomes
Risk appetite – Conservative banks offer lower limits to start
Another point to consider
When you applied for both cards, each company did a credit check. If they were applied for close together, the second company saw the first inquiry. This might have made them more careful. A hard credit check can slightly lower your credit score temporarily. Multiple checks in a short time can signal risk to lenders. Some companies also check what limits other credit card companies gave you. If they see you already have high limits elsewhere, they might start you lower.
What different credit card limits mean
Having different limits isn’t bad. In fact, it gives you options. Here’s how to use them wisely:
Keep low balances
Don’t max out the $1,500 card just because you can. Keep credit balances low on both cards. This helps your score and shows you’re responsible.
Make payments on time
Your credit history improves when you pay on time every month. Both credit card issuers report to credit bureaus. Good payment habits on both cards help build good credit.
Consider applying for higher limits later
After 6-12 months of good payment history, you can ask the $1,500 card company to increase your limit. Show them you’re responsible, and they might match the other card’s amount. You must also work towards improving your credit score. Paying all bills on time and keeping credit utilization low will help improve your score. If your income goes up, tell your credit card company. Higher income often leads to higher credit line offers.
How to manage multiple credit cards
Having two cards means managing two payment dates and two balances. Here are some tips:
- Set up automatic minimum payments
- Check both credit card account statements monthly
- Track spending on both cards
- Don’t let the card balance get too high
Some mistakes can hurt your credit score:
- Making only minimum payments
- Going over your limit on either card
- Missing payment dates
- Applying for too many new credit cards quickly
Use both cards strategically:
- Use the higher-limit card for larger purchases
- Keep the lower-limit card for daily expenses
- Don’t close the $1,500 card – it helps your total available credit
Conclusion
Getting $7,500 from one card issuer and $1,500 from another is normal. Different companies weigh factors differently. Your credit report, income, and other debts all play a role. The key is building good credit habits that work for any credit card, no matter if it’s a prepaid credit card, a regular credit card or other revolving credit.
Focus on using both cards responsibly. Pay on time, keep balances low, and both companies will likely offer increases later.
Thanks for submitting your question!
Consolidated Credit’s executive director, Jeff Schwartz will review it and give his response here, along with any additional tips that our credit counsellors have to offer. If you need immediate assistance, please call us and a credit counsellor will get you the help you need.
Please note: We try to answer all questions within 48 hours. However, not all questions may be answered on the website. If your question is similar to one we’ve already answered, we’ll direct you to the appropriate response via email. If we need more information, we’ll contact you at the email provided.
