What is a credit limit?

A credit limit on a credit card is the maximum amount of money that you are allowed to borrow from a financial institution using a credit card. A credit limit is set by the bank or credit card company to control the amount of money that a person can borrow. When you use your credit card to make purchases or take out cash advances, your credit limit is the maximum total amount that you can spend. When you are first issued a credit card, the credit card company will usually assign a credit limit based on your credit score, income, and other factors. The higher your credit score, the higher your credit limit is likely to be. You can usually request a higher credit limit if you need more spending power, but the bank or credit card company will likely review your current financial information before granting the request. Your credit limit is important to keep in mind, since if you use up the entire credit limit of your card, you may be charged a fee or penalties. It is also important to be aware of your credit limit so that you can manage your spending and stay within your budget.

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