
Credit card restrictions can determine how you use your card. For example, some cards may limit you to shopping at certain stores, and others may penalize you for late payments by charging a fee each time you're tardy. Restrictions vary, and the Federal Trade Commission says you should read your credit card application carefully before applying for a card.
Credit Limits
Your credit card company will establish a credit limit on your account when it is initially approved. The limit could be raised or lowered at any time. Some department store credit cards feature small credit limits of a few hundred dollars. Other full-featured bank credit cards such as a MasterCard or Visa may offer credit limits of more than $10,000, depending on your credit. You will not be allowed to charge more than your credit limit unless you have given your card company permission to process transactions that would exceed the limit. That opt-in requirement is part of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 signed by President Barack Obama.
Cash Advances
The credit card company may not allow you to withdraw all of your credit limit as a cash advance. Cash advances are available from ATMs and inside banks. Full-featured bank cards generally will allow you to take all of your credit limit as a cash advance, but department store and gas station cards may allow only a small amount to be taken as a cash advance.
Merchant Acceptance
Not all merchants accept every credit card -- another possible restriction. For example, a department store credit card can be used only at that department store or an affiliated company.
Collateral
Most credit cards are unsecured, meaning no collateral is required other than your promise to pay. However, secured credit cards require that you deposit money into a savings account that is held as collateral. The amount on deposit becomes your credit limit, and the bank issues you a MasterCard or Visa that works like any other full-featured bank card. You may be required to deposit more money into the savings account before receiving a credit limit increase.
References
- Federal Trade Commission: Choosing A Credit Card
- Federal Reserve Board: Credit Cards
- Credit Cards: What The New Law Means To You
- The White House: Credit Card Reform Act
- Discover. "How Is My Credit Card Limit Determined?" Accessed Nov. 18, 2019.
- Experian. "What is a Credit Utilization Ratio?" Accessed Nov. 19, 2019.
- Federal Trade Commission. "What to Know About Adverse Action and Risk-Based Pricing Notices," Accessed Nov. 19, 2019.
- Capital One. "Secured Mastercard from Capital One," Accessed Nov. 19, 2019.
Writer Bio
Robert Lee has been an entrepreneur and writer with a background in starting small businesses since 1974. He has written for various websites and for several daily and community newspapers on a wide variety of topics, including business, the Internet economy and more. He studied English in college and earned a Bachelor of Arts in liberal arts from Governor's State University.