What does no preset spending limit mean?

Quick insights

• Cards with no preset spending limit give you a flexible spending capacity that fluctuates based on a variety of factors.
• Typically, these cards come with higher limits than you would get from cards with fixed or preset limits.
• If you regularly make large purchases and can pay your balance in full each month, then this credit card might be the right choice for you.

You’re likely familiar with traditional credit cards that have a set credit limit, but what about cards with no preset spending limit? You may think that this card gives you unlimited purchasing power, but actually, no preset spending limit means the credit card has a variable credit limit that may fluctuate monthly.

It’s common for these cards to give you access to more credit than you would expect from cards with a fixed limit, and as a result, you may need excellent credit to get one. Note that Chase does not currently offer credit cards with no preset spending limit.

Here’s more on how credit cards with this unique feature work.

How the spending limit can change

Credit cards with no preset spending limit give you fluctuating purchasing capacity. Factors such as your payment history, credit score, income and spending patterns can influence the flexible limit from one month to the next.

You don’t need to request an increase to your credit limit with these cards. If you qualify for a higher limit, the credit card issuer will automatically make the adjustment.

Pros and cons of using a credit card with no preset spending limit

You may be wondering, “Is no preset spending limit good or bad?” The truth is that it depends on your needs and spending habits. Credit cards with no preset spending limit have advantages and disadvantages, and it’s helpful to consider them as you evaluate whether this card type will meet your needs.

Pros

• You may get a higher limit than what you would expect from credit cards with preset or fixed limits.
• You may be allowed to exceed the variable spending limit at the credit card issuer’s discretion without over-limit fees, but be sure to check the credit card’s terms and conditions.
• If you make large purchases regularly, this card could be a smart choice for you due to the relatively high spending limit.
• Regularly using the card and paying off the balance may help you increase the variable limit from month to month.
• These cards could be a good choice if you’re a business owner who has to make costly purchases.
• If you choose a rewards card with no preset limit and make big purchases every month, you will likely earn rewards on that purchase.

Cons

• The card may not work for cardmembers who like to control their spending with a preset credit card limit.
• If you are tempted to make unnecessary purchases that you can’t pay off quickly, you could end up accruing significant interest charges on your unpaid balance.
• The spending limit may be unpredictable as the credit card issuer does not typically publish their exact method for determining it.
• There’s uncertainty around whether you can make a purchase when your credit limit fluctuates from month to month, and your card could be declined.

As with any credit card, you’ll want to consider the fees, interest and APR to determine if it’s right for you. Often the credit cards with the most favorable terms do have a fixed credit limit.

Does it affect my credit score?

Traditional credit cards with set limits usually impact your credit in the form of your credit utilization ratio. This ratio measures how much of your total available credit is being utilized.

Credit cards with no preset spending limit are usually not factored into your total available credit. Note that there may be some variation with how card issuers report the limit to the credit bureaus. You may wish to check the credit card’s terms or contact the issuer to clarify how this information is reported.

These cards could impact your score if you miss payments or carry large balances on them. If your score takes a hit, you could potentially improve it by reading this guide on ways to raise your credit score.

Tips on using a credit card with no preset spending limit

Because you’ll likely have a higher spending limit than you would with a traditional credit card, responsible use is especially important. You don’t want to carry a large balance that rapidly accrues interest and may potentially harm your credit.

These tips may help you develop good spending and borrowing habits.

• Use the card for large purchases, such as costly equipment for your business or travel expenses, but only if these purchases are within your budget.
• Avoid interest and fees by paying off your credit card balance each month.
• Don’t let increases in credit limits tempt you to spend beyond your budget.

If you can follow these recommendations, then a card with no preset limit may be right for you.

In summary

Credit cards with no preset spending limit don’t offer you limitless credit. Instead, they give you a spending limit that fluctuates from month to month based on a variety of factors. While Chase does not currently offer credit cards with no preset limit, they may be a good choice if you regularly make large purchases and can pay your balance in full each month.