1. What is Credit Card Credit Limit?

The credit limit is the maximum amount of credit a financial institution extends to a client on a credit card. It's typically based on the borrower's ability to repay, which is often estimated using their monthly income multiplied by a factor.

2. How Does the Calculator Work?

The calculator uses a simple formula:

Where:

• \( Monthly\ Income \) — Your total monthly income in currency
• \( Factor \) — Multiplier typically between 2-3 (varies by issuer)

Explanation: Banks use this formula as a starting point, then adjust based on credit history, existing debts, and other factors.

3. Importance of Credit Limit Calculation

Details: Knowing your potential credit limit helps in financial planning, maintaining good credit utilization ratios, and understanding your borrowing capacity.

4. Using the Calculator

Tips: Enter your accurate monthly income (after taxes) and the factor used by your credit card issuer (typically 2-3). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why do banks use this formula?
A: It provides a quick estimate of repayment capacity based on income, though actual limits may vary based on credit history.

Q2: What is a good credit limit factor?
A: Most banks use factors between 2-3, with higher factors for customers with excellent credit histories.

Q3: Can I get a higher limit than calculated?
A: Yes, with strong credit history, low existing debt, and long banking relationships, you may qualify for higher limits.

Q4: Does this work for business credit cards?
A: Business cards may use different calculations incorporating business revenue and personal guarantees.

Q5: How often can I request limit increases?
A: Typically every 6-12 months, depending on the issuer and your payment history.