Credit limits are the maximum amount you can charge on a credit card, and they are an important part of how credit card companies manage risk. Limits are set based on factors like your income, credit history, and existing debt. A higher credit limit can be convenient, but it also comes with responsibility. One of the most important concepts related to credit limits is the credit utilization ratio — the percentage of your available credit that you’re currently using. For example, if you have a $10,000 limit and a $2,500 balance, your utilization is 25%. Credit scoring models heavily weigh utilization, with lower ratios generally being better for your credit score. Most experts recommend keeping utilization below 30%, and ideally closer to 10%. Having a higher limit can actually help your score, but only if you don’t overspend.