Credit Building Tips

If My Credit Limit is $1,000, How Much Should I Spend?

Shaun Connell
June 23, 2023

You've received your new credit card-- congratulations! You've been told that your credit limit is $1,000, but you've also heard through the grapevine that you shouldn't spend the full amount.

So, how much should you spend?

Solution icon Experts generally advise keeping your credit utilization ratio-per-card and overall-- at 30% or less. For a credit limit of $1,000, this means the maximum you should spend is $300.

At the same time, the 30% rule is just a guideline. A lower credit utilization ratio is always better, but the most important thing is that you don't spend more than you can swiftly pay back. If you're buying a house or otherwise need your credit score to be in tip-top shape in the near future, it's best to keep your credit utilization ratio low.

My Credit Limit Is $1,000-- How Much Should I Spend?

When you have a $1,000 credit limit, you might assume there's no problem with spending the full $1,000 within a billing cycle.

If you want to maintain a credit utilization ratio below 30% for your credit card with a $1,000, you will want to spend $300 or less each billing cycle.

There are a few reasons why you might not want to spend your entire credit limit, though. In fact, many credit and financial experts will advise that you keep your credit utilization ratio at 30% or lower.

woman holding credit card with 1000 limit

A $1,000 card limit means spending no more than $300.

The other factor to consider is how much you can afford to pay back. In general, it's a good idea to pay off your entire credit card balance every month rather than carrying a balance that accrues interest.

Understanding Credit Limits

Ok, so let's back up a step.

What exactly is a credit limit? What does having a $1,000 credit limit on your credit card mean?

  • Your credit limit is the total dollar amount you're allowed to charge to your credit card by the card issuer.

At the time you submitted an application for the new card, the lender took a look at your financial history and credit profile in order to determine the maximum amount of money that they would extend to you in the form of revolving credit. The amount they will extend to you before cutting you off is your credit limit.

The Factors That Determine Your Credit Limit

It might feel a bit mystifying when you receive word of your new credit limit-- how did the company determine how much money you have access to?

woman figuring out how much to spend with 1000 credit limit

Some of the factors that lenders will consider when setting your credit limit are:

  • Your income: Lenders will look at how much money you make to assess how able you'll be to pay back the money you use
  • Your credit score: This is a three-digit number that indicates how risky you are as a borrower
  • Your payment history: Your track record of paying bills on time will impact your credit limit
  • Your credit utilization: The percentage of your current credit limits that are currently in use

How to Determine How Much to Spend Based on Your Credit Limit

If your credit limit is other than $1,000, you can still easily calculate the maximum amount of money you should spend based on the 30% rule of thumb.

  • Using the $1,000 credit limit example, you must multiply 1000 by 0.3 to determine that the most you should spend is $300.

Here's the formula for determining the most you should spend in order to maintain a 30% credit utilization ratio:

  • Credit limit x 0.3 = Maximum you should spend to maintain 30% credit utilization ratio

Of course, there is both the credit utilization of each card to be concerned with and your overall credit utilization ratio. In the next section, we'll talk a bit more about each of these.

Understanding Credit Utilization Ratios

One of the factors that influences your credit score is your credit utilization ratio. In fact, it's one of the most influential factors in your credit score.

This is a ratio (expressed as a percentage) that relates the amount of money you owe on your revolving credit accounts to your total available credit.

Your credit utilization ratio is a percentage that describes how much credit you're using out of all of your available credit. There are two types of credit utilization ratios: per-card and overall.

  • Essentially, the higher your credit limit, the more money you can spend and still maintain a good credit utilization ratio.

For example:

  • If you have a $1000 credit limit and you spend $700, your credit utilization ratio is 70%-- i.e., quite high.
  • If you have a $10,000 credit limit and spend $700, your credit utilization ratio is 7%.

What Is Considered a Good Credit Utilization Ratio?

The general rule of thumb is that you should have a credit utilization ratio of 30% or lower in order to maintain good or excellent credit scores. When it comes to the credit utilization ratio, a lower one is always better for your credit.

According to Experian's director of public education, Rod Griffin, exceeding a 30% credit utilization ratio will "have significantly negative impacts on credit scores." He also states, "The 30% level is not a target, but a maximum limit."

If you're aiming to have truly incredible scores, you'll probably want your credit utilization ratio to be in the single digits. According to a senior director for FICO, “Consumers with FICO scores of 800 use, on average, 7% of their available credit.'

  • Using our example of having a $1,000 credit limit would mean spending no more than $70 to maintain a 7% credit utilization ratio.

The Two Types of Credit Utilization Ratios

It's worth noting that you'll want to be aware of your credit utilization rate from two different angles:

  • The credit utilization ratio of each card
  • Your overall credit utilization ratio

Your per-card utilization measures the percentage of the credit limit you're using for each card. Your overall credit utilization considers the percentage of credit you're using compared to all of the credit available to you.

Is Per-Card or Overall Utilization More Important?

Your credit scores will incorporate information about both your per-card and overall credit utilization ratios.

This means that you can't necessarily open a brand new card in order to try and counter the negative effects of having a maxed-out card.

The better way to go about things is to make sure that you aren't using more than 30% of the credit limit on any of your individual cards. When you make sure you're keeping your utilization low on each card, it means that you won't have to worry about your overall utilization.

For example, if you have three cards with different credit limits and your utilization ratio is 25% for each of them, your overall credit utilization ratio will also be 25%.

Credit Limit FAQ

Understanding your credit limit is important to make sure that you use your credit card responsibly. Let's take a look at some frequently asked questions to help ensure that your credit score and report stay in tip-top shape.

Is It Bad to Max Out My Credit Card?

Maxing out your credit card means that you've spent your entire credit limit. If your credit limit is $1,000, for example, maxing out your card would mean you have a $1,000 balance.

It's generally a good idea to avoid maxing out your credit cards. There are a number of negative consequences that can result, including:

  • Future transactions being declined: Though some cards might let you go over your credit limit by a little bit, these types of charges usually come with an additional fee. Typically, you won't be able to use your card anymore until you've made payments toward the balance.
  • A drop in your credit score: Having a high credit utilization can result in a significant drop in your credit-- as much as 50 points.
  • Potential for spiraling debt: It's all too easy to spend too much money on credit cards. In general, it's best to only spend what you'll be able to pay back the next month. Though maxing out your card doesn't necessarily mean you can't pay off the balance in a timely manner, many consumers end up in a bad debt spiral in this way.

If you max out your card and you're hoping to buy a house, finance a car, get a new credit card, or even rent an apartment, it could impact your ability to get approved due to a credit score drop.

Additionally, you have to be very careful maxing out your credit cards because of the potential for spiraling debt. The average American consumer has more than $5,000 in credit card debt. When you carry a balance from month to month, you'll be accruing interest payments and owing more and more with each statement.

Does Maxing Out a Credit Card Hurt Your Credit Score?

Your credit score can be negatively impacted when you max out a credit card. There are, however, a lot of different factors that will influence the extent to which your score is affected. These include:

  • Your credit utilization: Though it's ultimately best to keep your credit utilization low per card, maxing out a card with a low limit when you have a high overall credit limit won't be as big of a problem as maxing out a high-limit card with a low overall credit limit.
  • How many credit cards you have: Maxing out one card with a $1,000 limit when you have ten credit cards and an overall credit limit of $80,000 probably won't be much of a problem for your credit score. On the other hand, if you only have one card and it has a $1,000 that you max out, you'll see a big drop in your credit score.
  • Your current credit score: It might seem cruel, but the better your credit score is, to begin with, the bigger the drop will be in your score when "bad" credit behavior shows up on your credit report. If your credit is already less than ideal, a maxed-out card won't drop your score as much as if you started with near-perfect credit.
  • How long it takes you to pay off the balance: Credit card interest rates are high compared to other forms of debt, and you can end up owing well beyond your credit limit if you don't pay down your debt over time. If you struggle to keep up with the payments and your balance grows higher and higher, it could mean your score keeps dropping.

What Happens When You Go Over Your Credit Limit?

Can I Increase My Credit Limit?

Yes, it's possible to increase your credit limit. You can either ask the credit card company for an increase or wait for them to offer one to you.

However, the policies regarding credit limits are going to vary depending on the credit card issuer, and there's no guarantee you'll get one if you ask for one.

Increasing your credit limit can lower your credit utilization ratio and therefore have a beneficial impact on your credit score.

How Can I Improve My Chances of Being Approved For a Credit Limit Increase?

If you're interested in increasing your credit limit, there are a few things you can do to improve the odds you'll be approved:

  • Pay your bills on time: Your payment history is a big part of your credit score. Ensure you're paying your loans and credit card statements on time to show issuers you use credit responsibly.
  • Keep your info up to date: Make sure you check your account information to ensure that your financial and personal information is up to date. When considering an increase, lenders might ask for information about your employment status, income, and rent or mortgage payments.
  • Review your credit report: Errors aren't uncommon on credit reports, so you'll want to make sure that your credit report is free of inaccuracies before asking for a credit limit increase. You can get your credit reports from all three bureaus for free on If you find an error, you'll want to dispute it to have it corrected.
  • Keep your balance as low as possible: It's best to pay down your full balance every month. Even if you can't do this, though, it's best to try and pay more than the minimum monthly payment. This will help improve your credit utilization ratio and help you save money on interest, too.
  • Monitor your credit: There are a number of services you can use to monitor your credit. Many credit card companies offer free credit score monitoring services. This can help you catch errors or potential fraud as soon as they crop up.

Improving Your Credit to Open Up Financial Opportunities

Credit cards can be incredibly useful financial tools, but using them responsibly is essential. If your credit limit is $1,000 on a new card, you'll want to consider the different factors before racking up a $1,000 balance.

The general rule is that you want to keep your credit utilization ratio as low as possible-- both per card and overall-- to keep your credit score in good shape.

That being said, maybe you have no intention to take out a loan or get a new credit card anytime soon. If that's the case, you don't have to be obsessive over keeping your credit score perfect at the moment. The more important thing, then, is ensuring that you don't spend more than you can afford to pay back in a timely manner.

Staying on top of your credit score and credit report can be much easier than rebuilding credit after it's taken a nosedive. At the same time, rebuilding your credit is possible if it's less than ideal.

Whether you're starting from scratch building credit, trying to make sure you maintain a high credit score, or trying to improve your score after a few bad years, make sure you check out our Credit Building Tips blog for more credit resources.

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Written By:
Shaun Connell
Shaun Connell is a personal finance and credit expert with a passion for helping individuals eliminate debt and improve their credit. He's enjoyed writing investing and financial content for over 15 years, with expertise in real estate, debt, banking, credit, and wealth building. His work has been seen by millions on the web.

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