A credit limit is the maximum balance a card account may carry between statements.
A credit limit is the maximum balance a card account may carry between statements.
Also called: Credit line.
How it works#
The limit constrains more than large purchases: rental car deposits and hotel holds block part of it temporarily. Increases are usually available and, at many issuers, without a fresh hard credit check, while reductions are made by the bank on its own initiative. Anyone regularly close to the limit should pay down mid-cycle, otherwise transactions start getting declined.
Not to be confused with#
A credit limit is not the same as available credit: pending authorisations and unbilled purchases reduce the amount actually usable.
In German#
The German term is Kreditrahmen. German version of this term
Related terms#
- Credit utilization: Credit utilization is the ratio between the balance on a card and its credit limit, expressed as a percentage.
- Credit inquiry: A credit inquiry is a lender’s check of a credit file; a hard inquiry is recorded and visible to others, while a soft inquiry is not.
- Carrying a balance: Carrying a balance means leaving part of a card bill unpaid so that it rolls into the next month and accrues interest.
Articles that use this term#
TopicEvery article and term onCards and money.