Available credit is not the same as your credit limit. Learn about the differences. Trending Videos
Credit limit is the total amount of credit available to a borrower, including any amount already borrowed. The amount you have left over to spend before reaching your credit limit is known as available credit, which is calculated as the difference between your credit limit and account balance.
Short answer: Yes, you can spend your available credit. Available credit is the amount of your credit limit that you haven’t used yet. It’s like the remaining balance on a gift card.
But there are a few things to keep in mind:
- Spending your available credit can impact your credit score. Your credit utilization ratio, which is the amount of credit you’re using compared to your total available credit, is a factor in your credit score. Experts recommend keeping your credit utilization ratio below 30%. So, if you have a credit limit of $10,000, you should try to keep your balance below $3,000.
- You might be charged interest on your balance. If you don’t pay off your balance in full each month, you’ll be charged interest on the unpaid balance. The interest rate will vary depending on your credit card’s terms and conditions.
- You could be charged over-the-limit fees. If you spend more than your available credit, you could be charged an over-the-limit fee by your credit card issuer. These fees can range from $25 to $35.
Here are some additional things to consider:
- It’s generally a good idea to pay off your credit card balance in full each month. This will help you avoid interest charges and keep your credit utilization ratio low.
- If you can’t pay off your balance in full, try to make at least the minimum payment due each month. This will help you avoid late fees and keep your account in good standing.
- Monitor your credit card statements closely. This will help you keep track of your spending and make sure you’re not exceeding your available credit.
Here are some additional resources that you may find helpful:
- Capital One’s article on available credit: https://www.capitalone.com/learn-grow/money-management/what-does-available-credit-mean/
- Investopedia’s article on available credit: https://www.investopedia.com/ask/answers/102814/what-difference-between-available-credit-and-credit-limit.asp
Additional Tips:
- If you’re concerned about spending too much on your credit card, you can set a spending limit for yourself. This will help you stay within your budget and avoid overspending.
- You can also use a budgeting app to track your spending and make sure you’re staying on track.
- There are also a number of credit card rewards programs that can help you earn points or miles on your purchases. This can be a great way to save money on travel or other expenses.
Remember, the key to using credit responsibly is to be mindful of your spending and to make sure you can afford to pay off your balance each month.
Can I spend my available credit?
You can spend your available credit up to your credit maximum. However, staying below 30% of your total available credit line will be best for your credit score. Spending more than you can afford to pay back can send you into a debt spiral where interest payments compound the debt fast.
What Happens When You Reach the Credit Limit?
Credit card companies usually refuse any more transactions if your credit limit has been reached and there is no more available credit. However, if the borrower has consented to the terms in writing, some credit card companies permit borrowers to raise account balances slightly above credit limits. Occasionally, charges result in an increase over the credit limit, and other times, interest, fees, or penalties do.
Generally speaking, credit card companies impose penalties on accounts with balances over the credit limit—as long as the borrower provides written consent. Customers may be tempted to sign any document that provides them with access to money when they are in need. However, if interest or other fees are the only reason you are over your limit, you cannot be assessed an over-limit fee. Also, your card company cannot charge you an over-limit fee more than once in a payment cycle.
The maximum amounts that credit card companies may charge for credit card accounts that exceed the credit limit are regulated by the Consumer Financial Protection Bureau (CFPB).
If a balance surpasses a specific credit limit for the first time, there could be a fee of up to $27. A fee of up to $38 may be imposed if a balance surpasses the credit limit twice in a span of six months. However, the penalties or fees applied cannot exceed the amount that the account is over the limit.
When a credit card user violates the terms of the agreement, some credit card companies may cancel a previously offered low introductory APR and charge a high penalty annual percentage rate (APR).
Transactions completed prior to choosing to opt out of over-limit fees are not affected by this policy. Those who have consented to pay fees for going over credit limits may withdraw their consent at any time by providing written notice to the lender. Additionally, after a borrower has opted out, the lender is more likely to reject transactions that take an account over the credit limit.
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FAQ
Why can’t I spend my available credit?
Is it OK to use all available credit?
Can I spend over my available credit?
Can I use my current balance on my credit card?
What if my credit limit is less than my available credit?
Your available credit will often be less than your credit limit based on any outstanding balance or pending charges that you have on your credit card. If you have a total credit limit of $7,500 on a particular card, and an outstanding balance of $1,000, then your available credit is $6,500.
How much credit is available on a credit card?
If you have a total credit limit of $7,500 on a particular card, and an outstanding balance of $1,000, then your available credit is $6,500. The available credit amount is the maximum amount that you can charge on your credit card at the current moment.
Can I use my available credit?
While it’s fine to use your available credit, it is important to monitor both your current balance and available credit, as well as your available funds to pay at least the minimum payment due at the end of each billing cycle. Exceeding your credit limit can result in penalties, fees and potentially damage your credit score.
How do I get more available credit?
If you need more available credit for any reason, there are a few different ways to go about it. For example, you can: Ask your credit card issuer to increase your credit limit. Apply for a new credit card. Pay down credit card debt.