Credit limit is an important term for credit card, since your credit card’s credit limit decides the maximum balance you can have on your credit card within a period of time. In other words, credit limit refers to the concept that how much you can owe by using your credit card.
If you do not manage your credit limit well, for example, your balance exceeds the credit limit, this kind of activities might harm your credit score and bring you a lot of troubles by triggering the penalty rate.
The limit of your credit card includes total credit limit and available credit. Total credit limit means the maximum amount of money that you could borrow within a period of time, while the available credit refers to the current available amount of money that you could borrow. For example, if you spent 1000 dollars by using your credit card and your total credit limit is 2000 dollars, your available credit is another 1000 dollars because you still have 1000 dollars to use.
What if you want to buy something that is above your available credit by using your credit card? Let’s continue this example. If you want to buy something at amazon that is 1050 dollars, while you only have 1000 dollars in your available credit, the credit card issuers probably will give you some penalties. Thus, the best way to solve this dilemma is to make some repayment first. If you repay around 100 dollars, then your available credit would return to 1100 dollars. Under this situation, you have enough available credit for the transaction that costs you 1050 dollars.