Understanding credit limits and APR before you apply
Credit cards can help offer financial freedom, especially with their wide range of benefits. But to make full use of them, you should understand the finer details and how they govern your spending.
Credit limits and APRs are two major metrics that many agree to without knowing what they mean. If you’d like to learn how they affect your credit card, then keep reading this quick guide.
What is APR and how does it affect your borrowing?
An APR, or Annual Percentage Rate, is the combination of interest rates and compulsory fees. While this might seem relatively minor, it exists to highlight the true cost of borrowing money and can reflect what you would actually repay over time.
Typically, people only tend to compare purchase rates, while writing off the other ‘hidden costs’ like annual charges. Since APRs take all the extra fees into account, it can paint a more accurate picture of what you’ll borrow. This means you can more accurately compare different offers and choose the one that will best suit you, rather than the one with the lowest purchase rates.
Credit limits: How they’re set and why they matter
A credit limit influences how much you can borrow, and it’s typically determined by a range of factors. These include your income, credit score, the lender’s policies, and more.
The limit is set based on how much the bank trusts you to borrow and repay. If you go over the limit, you might find yourself subject to various fees and higher interest rates. If you need your limit raised for any reason, you usually need to contact the bank and provide suitable reasoning, though individual policies may differ.
Recent changes impacting credit card use in the UK
In March 2025, the UK government announced a crackdown on credit card use, after spending more than quadrupled in the last four years. With contactless payments and digital wallets, spending money has never been easier.
This cultural shift has impacted how we think of money and shifted our focus towards excessive spending. With stricter payment regulations in place, we might start to see a return to saving and financial responsibility.
Choosing the right card: Balancing APR, fees, and limits
With so many different types of cards available, it can be difficult to know which card is best suited. Do you choose one that offers cashback, or the one with the lowest fees? Ultimately, only you can make this decision, but we encourage you to consider the annual fees against the rewards. This can help you realise whether you’re actually getting a good deal.
When you’ve found one with offers that you like, you’ll need to check that you’re eligible to use it. Since being denied a credit card can negatively affect your credit score, we recommend using pre-approval tools to gauge your eligibility.
