What is the Credit Limit on a Credit Card?

What is the Credit Limit on a Credit Card?- Its the maximum capped amount that you,as the card user are allowed to spend.If your credit limit is $1000,then you can swipe your card for purchases upto a maximum of $1000 at grocery stores,gas stations,restaurants etc.It is highly recommended that you do not use the entire balance of the card till the threshold of the credit limit,as this may lead to unwarranted repercussions.

 
If you max out your card and by using up the entire balance,you end up paying charges by way of interest every monthly cycle and risk hurting your credit score.
 

How is the credit limit determined ?

Some of the ways credit card issuers set the credit limit for a card user are usually based on the current income of the individual.They may also check how much tax you are paying every year or they may simply check your credit score.It can also be a combination of all these.
Setting a credit limit for a customer is critically important so that the issuer can gauge the repaying capacity of the user.It is afterall a short term loan and needs to be paid back every month,albeit in smaller amounts.
By checking the users spending habits and accordingly assigning a credit limit will allow the card issuer to prevent itself from risking a defaulting user.

Can you use more than your credit limit?

There are few ways by which your balance increases above your prescribed credit limit.
If you max your credit card (use it till its limit) and miss a payment,you will incur late payment fees.This will be added to your outstanding balance and in the next billing cycle ,finance charges will be added again on the entire balance.This will shoot the balance over the credit limit.As a result you will now incur over-limit fees since the balance has gone over the credit limit.
Soem card issuers allow you to spend a little more than the assigned credit limit.However they will intimate you via text message when you cross the limit and you may also be charged overlimit fees.

Can my credit limit be increased ?

There are a few factors accroding to which the card issuer will want to increase your credit limit.Of these the most common is how timely your monthly payments are made against your balance.
I have noticed that credit card companies do not like when oyu make large payments on the card.They prefer you pay the minimum due,but on time.They benefit more when you pay only the minimum,this way,they can earn more interest on your impeding balance.
Also,if you have a particular card for many years,every 18 months or so,you will get a call or letter from the issuer asking if you would like an increase in credit limit.Personally, in fact there has been instances when the card issuer has directly increased my credit limit within even asking me,and sent me a text message later informing me of the increase.
 
 

The link between Credit score and Credit limit

There are few ways by which your credit score and credit limit are intertwined.As stated earlier,one of the basis on which your credit limit is relative to your credit score.The higher your credit score,the higher will be your credit limit,it is directly proportional.

In the above image from Credit Karma you can see that first time card users and people who might have never borrowed money via a loan are given a stating credit of just about $1000.This is for users who have a low credit score.As the credit score increases,so does the credit limit proportionately.
There is a direct correlation between the credit score and the credit limit.