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What is a No-Limit Credit Card?

A no-limit credit card may be troublesome if it comes with a high interest rate.
Some credit cards do not have a spending cap.
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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 04 August 2014
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A no-limit credit card is one with no spending cap on it, provided you pay your bills in a timely fashion. American Express or Amex is probably the best known of the credit cards to offer no spending limitations. When they first did so, borrowers were expected to pay their full balances at the end of each month. Now Amex frequently allows for flexible payments, and they may limit spending if payments are not adequate.

A number of credit card companies now offer a no-limit credit card to people with near perfect credit and with significant amounts of income. This can be a blessing or a curse depending on interest rate, and on how wisely you use credit. On the one hand, a huge unexpected expense can be easily met with a no-limit credit card. Conversely, you can rack up huge bills with profligate and reckless spending, in a very short period of time.

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Another disadvantage to this type of credit card may not be apparent to most people, but it is something noted by organizations like The Motley Fool, which is expert in many issues of finance and investment. Part of your credit score, about 30%, considers the amount of money you have borrowed, and the limit on your present credit cards. A no-limit credit card company may report your limit as $0 if you have not used the card, or they may report a maximum limit available to you. They may not, nor are they obligated, to report times when you put tons of expenses on a credit card and then paid them off.

While some companies will report your timely payments and paid off amounts, others simply report an extremely low limit. For instance if you spent $100 US Dollars (USD), your limit might be considered $100 USD, or it may merely be reported as zero. You’ll need to check with a credit card company on how they report payments and limits on a credit card with no limit before you obtain one. Some people who are scrupulous are paying off their cards at the end of each month suffer major losses to their credit score, without even realizing it, if their spending ability is rated at zero, or their payments don’t count toward showing credit worthiness.

There are some other reasons why a no-limit credit card might not be your best bet, though there are some good reasons to have one too. You might not want a no-limit card if you do have trouble paying your bills or if you pay a higher interest rate for unlimited purchasing power. Of course, it may make sense to have one, especially for a business, if you conduct the majority of your business on credit, paying the balance at the end of each month. It makes for fairly easy accounting, and can help you spend more as needed, if your business grows.

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Discuss this Article

icecream17
Post 3

SauteePan- There are some companies that offer credit to those with bad credit.

Usually these cards are referred to as secured credit cards. They are secured because in order to obtain one of these credit cards, you will have to place the amount of the credit limit in a bank account and the bank then withdraws from this account when you charge your credit card.

These cards are also known as prepaid credit cards for that reason. Many times these cards offer a very low limit of about $500. Here the bank does not risk anything and the transactions with the prepaid card count towards the person’s credit rating which over time allows them to restore their credit rating to an acceptable number.

These types of credit cards are also good for students that are trying to establish a credit history. Since the limit is low and you have to fund the account, you will usually learn how to budget and spend your money wisely. I think you can even apply online for these credit cards.

SauteePan
Post 2

Cafe41- Do people with bad credit receive bad credit card offers too?

cafe41
Post 1

Having a no limit credit card is also like having a very high limit credit card too. I have two credit cards that are no annual fee credit cards that offer me a credit limit of $25,000 each.

While there is a limit, I always pay off my balances every month and could never see myself charging anywhere near that kind of money. One of my credit cards is a cash back credit card that offers a various percentages back on groceries, gas, and restaurant bills.

Many of the best offers are for a VISA or a MasterCard that is affiliated with a gas station. These cards offer 5% cash back on gas purchases and about 1% on other purchases.

You can apply online for the credit card or look for an application next time you get gas. It is really worthwhile to do a credit card search to see which ones offer the best rewards points or cash back offers.

A great site to review the best credit card rates is Bankrate. At Bankrate you will get information on the best credit card rates nationally. The site will also offer information regarding the annual fee if it is applicable.

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