6 Factors That Determine the Limit of Credit Cards in Canada

Credit cards are loans that allow cardholders to borrow money to make purchases. The cardholder must repay the borrowed amount plus interest within a specified time. The interest rate charged on credit card balances can vary depending on the card issuer, the cardholder’s creditworthiness, and other factors.

For this reason, credit cards have become ubiquitous in modern life, and they are no exception in Canada. They are an excellent tool for managing finances and making purchases, but they can also be a source of financial stress and debt if not used responsibly. Because of this, credit companies impose limitations on credit cards, which are determined by certain factors. These include:

#1 – Credit Score

Maintaining a high credit score and credit rating is crucial when applying for a credit card, particularly one with a high credit limit. While there is no limit on credit scores when applying for a credit card, demonstrating your financial responsibility increases your chances of approval, so you should have a credit score of at least 650.

When assessing your credit score, lenders can also access your credit report, which provides a comprehensive overview of your credit history and influences your credit score. Based on your credit score, whether high or low, lenders will utilize this information to decide your eligibility for various financial products and services.

#2 – Your Income

Your income level plays a significant role in determining your credit card limit, and it’s also a factor that some issuers consider while choosing the appropriate credit card for you. Several credit cards come with income requirements, which ascertain your eligibility for those cards.

For example, if you have a high income, you may be eligible for premium credit cards that offer exclusive perks and benefits, such as travel rewards or cashback. On the other hand, if you have a lower income, you might be eligible for more basic credit cards with lower credit limits and fewer benefits.

#3 – Credit Card Providers

The card providers significantly influence the type of card you are approved for and its specific limit. Being approved for a low limit on one card doesn’t necessarily mean you won’t qualify for a higher limit with a different provider. Each provider may have varying approval amounts even with the same qualifications.

For one, if a provider sees you as a high-risk borrower due to a poor credit history or low income, they may offer you a card with a lower limit to minimize their risk. On the other hand, if a provider sees you as a low-risk borrower with a good credit history and stable income, they may offer you a card with a higher limit to encourage you to use their card more frequently.

#4 – Debt-To-Income Ratio

The debt-to-income (DTI) ratio plays a significant role in determining the amount you get approved for. Most credit card providers prefer a DTI below 40% to approve, as it increases the likelihood of them recovering their funds. A lower DTI often results in a higher credit limit, while a higher DTI may lead to a lower one.

#5 – Existing Credit Cards

When you possess multiple credit card accounts, providers will examine these cards and their respective limits to determine your credit management capabilities. If you have existing cards with higher credit limits and demonstrate responsible usage, you are more likely to be approved for a high limit again.

Why Higher Limits Are Common

Many credit cardholders prefer having lower limits because it helps them manage their spending and avoid accumulating excessive debt. However, it’s not about the limit because it’s a matter of utilizing them. When used correctly, they can favourably influence your credit rating.

To ensure a positive effect on your credit score, it’s advised to maintain your credit card balance below 35% of the card’s credit limit. For example, with a $10,000 limit, the ideal usage should not exceed $3,500. This is why a $10,000 limit is more prevalent than a $2,000 limit, as it is easier to surpass the 35% usage threshold with a lower limit.


A credit card is highly beneficial because it allows for flexibility in spending and building a good credit history. However, it must be used responsibly by staying within the recommended usage threshold and paying off balances on time. This way, you can maximize your credit cards without worrying about accumulating excessive debt or negatively impacting your credit score.

If you’re looking for bad credit online loans, 365 Loans Canada can help you! We understand that having bad credit compromises your borrowing capabilities, so we offer different loan programs for those who cannot get them from most banks. Mail us at info@365loans.ca to apply!

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