Credit limit: Difference between revisions
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{{Unreferenced|date=December 2009}} |
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A '''credit limit''' is the maximum amount of [[Credit (finance)|credit]] that a [[financial institution]] or other [[lender]] will extend to a [[debtor]] for a particular [[line of credit]] (sometimes called a credit line, line of credit, or a tradeline). |
A '''credit limit''' is the maximum amount of [[Credit (finance)|credit]] that a [[financial institution]] or other [[lender]] will extend to a [[debtor]] for a particular [[line of credit]] (sometimes called a credit line, line of credit, or a tradeline). For example, it is the most that a [[credit card]] company will allow a card holder to take out at once on a credit card. |
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This limit is based on a variety of factors ranging from an individual's ability to make interest payments, an organization's cashflow or ability to repay the credit card debt and is an obligation of the consumer to pay just like all other parts of the balance. |
This limit is based on a variety of factors ranging from an individual's ability to make interest payments, an organization's cashflow or ability to repay the credit card debt and is an obligation of the consumer to pay just like all other parts of the balance. |
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Revision as of 12:57, 25 May 2016
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A credit limit is the maximum amount of credit that a financial institution or other lender will extend to a debtor for a particular line of credit (sometimes called a credit line, line of credit, or a tradeline). For example, it is the most that a credit card company will allow a card holder to take out at once on a credit card.
This limit is based on a variety of factors ranging from an individual's ability to make interest payments, an organization's cashflow or ability to repay the credit card debt and is an obligation of the consumer to pay just like all other parts of the balance.
Maxed out
A line of credit that has reached or exceeded its limit is said to be maxed out. While the line of credit is maxed out, it cannot be used for any further activity unless the consumer pays off at least some of the debt to enable it to fall below the limit, the creditor agrees to extend the limit, or the creditor allows one or more additional purchases with the charging of an over-the-limit fee.