Why do I have a daily limit on my credit cards?

Some credit cards can have a daily limit for spending that can mean that a person who has not got near their credit limit will find that they can not spend above a certain amount per day.

The reason for a daily limit is as an anti fraud measure.  When a credit card is copied or stolen then the credit card can get used very quickly in order that the criminal gets the maximum benefit out of the credit card before the card is stopped.  This will mean that a daily limit on a credit card will mean that the credit card can only spend a certain amount in that day, and that this can serve as a warning to a credit card company if the card is used quickly.  Although it may mean that the daily limit is quickly reached, it will be another day before the card is used, if the card is not stopped or suspended in that time.  In effect it is a fire break against fraud.

Daily limits have become less common with credit due to the growth of spending analysis at credit card companies.  These are programs that will analyse spending patterns that are unusual.  These are broadly in two groups; the first area is spending that are usually indicative of a stolen card – such as easily re-sellable items such as jewellery or mobile phone credit.  The second area is that spending that deviates from the persons spending patterns, such as a large amount of spending in a different place and on different items.  This is why some people can have trouble with their credit card getting cancelled while they are on holiday, as the spending patterns can be very different and it is far from their home town.

It is important to understand the difference between a daily limit and a credit limit.  The daily limit is essentially a way of managing a credit card and the credit limit is the amount that a credit card provider will be in principle willing to lend to a credit card borrower.

This will mean that it is usually comparatively easy to lift a daily limit, for example to buy a large item such as a car or a piece of furniture.  The person should phone the credit card company beforehand to ensure that they know that the money will be going out of the account, and this will usually be entered in on the system.