How do unlimited credit cards work?

Do unlimited credit cards exist?

There are a number of charge and credit cards on the market with no preset spending limit rather than being strictly ‘unlimited’, but it’s worth keeping in mind that the majority of these are expensive premium cards. These products tend to come with significant bonuses and perks, such as a concierge service, complimentary airport lounge access, travel insurance and purchase protection, rewards points and more, but all these features can cost a pretty penny.

You can generally expect to pay a significant annual fee for one of these cards, as well as a hefty purchase rate. Moreover, some flagship credit cards—such as ‘Platinum’ or ‘Diamond’—may come with ‘minimum’ credit limits: a minimum amount you need to spend each month to keep using the card, which can usually be several thousand dollars.

It’s also worth noting credit cards with no preset limits don’t simply give you unlimited purchasing potential. A ‘no limit’ credit card simply means that the credit provider has not set a universal monthly limit for all customers. A credit card provider will still negotiate an individual credit limit for each customer based on their ability to make repayments, including credit history, income and expenses; if you have a high income with few expenses, then the limit you’re offered may be very high!

Some providers have a policy of not sharing spending limit details with the customer and will approve transactions at their discretion. Each customer’s credit limit is usually determined based on a number of factors, including income levels, payment history and historical spending behaviour.

What are the pros and cons of no limit credit cards?

Pros

• Convenience of having no preset limit on your spending

• Extensive rewards program, with points redeemable for many goods and services

• Potential to save some money through use of card features such as a complimentary concierge service, airport lounge access and insurance benefits.

Cons

• No preset spending limit can encourage some people to spend beyond their means and incur hefty interest payments

• Higher interest rates and annual fees than most credit cards

• Customers may not use all the included services and rewards

• Having a higher credit limit may make accessing other forms of credit more difficult, as lenders consider all of your credit limits to be potential forms of debt

What’s the difference between credit cards and charge cards?

Credit cards are very common—Visa and MasterCard are two of the main payment system providers, and most banks and financial institutions will sell one of these credit card products. Their key feature is allowing you to only make a minimum repayment at the end of each month; you can maintain a continued balance of debt over multiple billing cycles, however you’ll be charged interest on this debt. Credit cards typically come with a set credit limit each month.

A charge card, by contrast, is a card which you must pay off in full at the end of each month, or else be subject to late fees and restrictions. As a result, charge cards typically have no credit limit each month. Charge cards are much less common than credit cards nowadays—one of the best-known charge card providers is American Express.