Most credit cards have a daily spending limit, which dictates how much you can either spend or withdraw as cash on any given day.
Coming up next
- Key takeaways
- What is the daily spending limit?
- Why do credit cards have daily spending limits?
- Is the daily spending limit the same as the credit limit?
- Are daily spending limits mandatory on credit cards?
- Do cash advances count towards the daily spending limit?
- What happens if you try to spend more than the daily spending limit?
- Is it possible to change the daily spending limit?
- Example
Key takeaways
- A credit card's daily spending limit is distinct from the overall credit limit.
- Security features, like real-time transaction monitoring, have reduced the need for daily spending caps.
- Daily spending limits can be used to help manage and avoid building up debt, but can be inconvenient.
What is the daily spending limit?
Credit card issuers generally have a daily spending limit in place. The limit on how much you can spend per day is usually lower than your credit limit.
Why do credit cards have daily spending limits?
Credit cards have daily spending limits to minimise the potential damage of fraudulent spending on your card.
Daily spending limits are not as commonplace now since banks have improved their ability to identify, counteract, and deal with fraudulent credit card purchases.
Is the daily spending limit the same as the credit limit?
No. The daily spending limit is not the same as the credit limit.
- Daily spending limit. The maximum amount that can be spent in a day.
- Credit limit. The maximum amount that can be borrowed at any one time.
If there is one, the daily spending limit is typically less than the credit limit. It can be considerably lower.
For example, if you had a daily limit of $500 and a credit limit of $5,000, you could spend $500 every day for 10 days before maxing out the credit limit. At this point, you would be unable to use the card to buy anything until you repay some — or preferably all — of the balance.
Are daily spending limits mandatory on credit cards?
The daily spending limit is optional, thanks to improvements in anti-fraud screening. If your credit card does not have a daily spending limit and you would like one, you can request the issuer to set one up.
Do cash advances count towards the daily spending limit?
Yes. Withdrawing cash from an ATM using your credit card counts towards the daily spending limit.
What happens if you try to spend more than the daily spending limit?
If you try using the credit card to pay for something that will take you above the daily spending limit, the bank will decline the transaction. Additionally, you may be charged an over-limit fee.
For example, if your card’s daily spending limit is $500 and you have already spent $300, then a transaction for $201 will be declined.
Is it possible to change the daily spending limit?
Yes. You can contact the bank’s customer service department and request that they change your credit card's daily spending limit. You may ask to increase or decrease it.
Example
You've been saving up for a big purchase costing $1,500. You have a credit limit of $5,000 on your credit card with a balance of $1,000, leaving $4,000 of available credit.
However, when the sales assistant swipes your card, it's declined. You're embarassed. How could that be? You've got more than enough credit available to pay for it.
That's when you remember that your card has a daily spending limit of $500. Even though you're well below your credit limit, the daily spending limit means the transaction can't be approved.
You call your bank, explain the situation, and they increase your daily limit. The transaction goes through smoothly.
