The question of a no-limit credit card is often discussed among consumers who need to make a big purchase or who don’t want to worry about their card being declined. However, a credit card that is truly a no-limit credit card does not exist.
All credit cards have limits. However, some credit cards are called no spending limit credit cards or credit cards with no limits. These cards have either very high limits or no official published limits at all.
Generally, these ultra-high limit cards are limited to consumers who have excellent credit scores. If you want bragging rights or the practicality of a nearly no-limit credit card, everything you need to know can be found below.
What exactly is a no-limit credit card?
A no-limit credit card offers ultra-high limits or no preset limits at all. In the event of a card with no preset limit, your limit will be determined by your income, credit score and total debt amount. Keep in mind that a card with no limit doesn’t mean that your credit usage isn’t being reported.
Paying on time and keeping your balance low is just as important with these types of cards as it is with any other card. But you also need to consider your revolving credit utilization. Since these cards may not have a set or published limit, you must understand what the actual limit is and how it’s being reported.
And although there is no published limit, you need to know the limit to avoid maxing out your card. Plus, as long as you pay off the credit card in full every month, it won’t hurt your credit score.
Should you get a no-limit credit card?
Whether you should get a no-limit credit card or not depends on your personal financial situation as well as your goals. Here are a few pros and cons of a no-limit credit card.
|These cards increase your total available credit, which will lower your credit utilization ratio.||You can easily overspend.|
|They make it easy to make large purchases.||Carrying a large balance can still harm your credit score.|
|Many of these cards come with exclusive elite bonuses on travel or experiences.||For most consumers, it is not necessary to have a no-limit credit card. Other credit cards offer better rewards and lower annual fees.|
How no-limit credit cards can affect your credit score
Yes, a no-limit credit card can affect your credit score in two ways: credit utilization ratio and total debt. If the no-limit credit card has a $50,000 limit, and you spend $40,000, your credit utilization ratio on that card is 80%. This value is too high and it can affect your credit utilization ratio.
Likewise, carrying debt for months on the card can hurt your credit score. Any credit utilization above 30% can hurt your credit score. If, in the above example, you pay $10,000 right away and plan to pay $10,000 per month moving forward, you still have a credit utilization ratio of 60% for the first month and more than 40% for the second month, including interest.
How to get an unlimited credit card
If an unlimited credit card makes sense for you, it’s possible to get a credit card with a high limit. You can even obtain a card with no limit at all as long as your credit score is in good shape. Here’s how to get a credit card with unlimited money without harming your credit score.
Have a high income
If a credit card lender is offering you an extremely high credit limit, they will likely need to verify your income. A credit card company might verify with the following items:
- Bank statements
- Calling your employer
- Tax documents
- Profit and loss statements for business lines of credit
Keep in mind, a company might ask for other documents other than the ones listed above.
Have excellent credit
High limit credit cards are typically only extended to individuals with near perfect or perfect credit. Excellent credit can be obtained by always paying on time, having a diverse credit mix ( mortgage, auto, credit cards), and lengthy credit history.
How to manage a no limit credit card
If you have been extended a no limit credit card you likely have maintained healthy credit habits. below are some tips for maintaining your excellent credit habits.
Refrain from overspending
Just because a credit card has no limits doesn’t mean you shouldn’t set your limits based on your financial situation. The number one rule of all credit cards is not to overspend. Credit cards with no limits make it easier to overspend, which makes it that much more important to avoid overspending.
Set up automatic payments
You can set up automatic payments so that your card never goes unpaid. Most credit card companies will let you choose to automatically pay the full credit card bill, the minimum payment due or another preset amount.
Pay off your balance every month
When you want to use your credit responsibly, the best plan is to pay off your balance in full every month. In other words, don’t spend more than you can pay. By doing so, your credit score will remain in the excellent range, even with a no-limit credit card.
Don’t use more than 30% of your credit limit
Even with a no-limit credit card, you should know the limit and try to keep your credit utilization ratio below 30%. This is considered the maximum optimum credit utilization ratio. Beyond that, you will see a decline in your credit score.
Don’t apply for credit often
Every time you apply for a credit card, the company will make a credit inquiry with the credit bureaus. This inquiry will also appear on your credit report.
A single inquiry will usually only cause your credit score to drop by a few points, and the subtle decrease is temporary. However, too many inquiries as a result of applying for too many credit cards can hurt your credit score.
Is a no-limit credit card right for you?
There can be risks associated with no-limit credit cards. For some people, especially those with excellent credit scores and high-income levels, a no-limit credit card can be a fun and convenient addition to your credit profile.
The basics of responsible credit usage remain the same. You must pay your card on time, in full, and you shouldn’t overspend. For this reason, users must know their limits even with no-limit credit cards. Find yours, and keep building your credit along the way.
What does no credit limit mean?
No credit limit means the credit card either does not have an established credit limit or the limit is set for each consumer with the possibility of changing over time.
Is it possible to have a credit card with no limit?
It is possible to have a credit card with no limit, though most credit cards that are marketed as no-limit cards do have a limit for each consumer.
What is a good credit limit?
A good credit limit will vary from one card and consumer to the next. With high rewards cards where credit limits range from $5,000 to $10,000 or more, a limit of $5,000 might be considered low. With other cards, a limit of $5,000 could be viewed as being high. According to Experian, the average U.S. cardholder had a total credit limit on all cards of $31,015 in 2019.