What is a credit limit?
The credit limit is the amount approved by the bank for the selected lending program. With a credit card, it is renewable, that is, a person makes certain expenses from the card, then replenishes the account and pays them again. If the bank agreement is valid, the plastic holder can use these means to pay for goods or withdraw from an ATM.
It is a mistake to believe that this concept applies only to credit cards. There are other banking products that are provided in a similar manner. For example, you can use a revolving line for overdrafts and loans issued in tranches. But most often this term is used in relation to credit cards.
A credit line can be revolving and one-time. For example, the bank has calculated a certain amount of the loan and placed it on the card. Under the terms of the program, the client can spend all the money from the plastic, and then only return it. After using the limit, the card will work exclusively to pay off the debt, not allowing you to withdraw money.
How is the amount calculated?
What is such a restriction for? The bank calculates a certain amount for each client, which he can return without problems. If you give a person more money than he can pay, there will naturally be a delay, which means that the creditor will not receive these funds back. Therefore, a certain limitation is established, including for premium cards.
Depending on the amount on the credit card, the following classification is applied:
- Zero limits. It is used when the size of the possible loan has not yet been calculated. If the client decides to use the card, he must submit an application to the bank. After that, the amount on the account will change depending on the person’s income.
- Minimal. The bank is reinsured and approves a small limit for those customers who have no banking history or have previously been delinquent. If a person makes monthly payments on time, the line of credit can be increased later.
- The maximum is the limit that is set by the terms of the credit card rate. Few clients receive approval for it, because for this it is necessary to confirm a very high income.
What determines the size of the credit line:
- the amount of income;
- debt burden per person (number and size of issued loans and credit cards);
- the presence of minor children;
- banking history, that is, the quality of loan repayment;
- monthly turnover on the salary card.
The amount of the credit limit is calculated individually for each client by a special scoring program.
Additionally, the credit card payment system matters. Visa and Mastercard can set their own restrictions, within which banks announce the limit for this tariff plan. Most often, financial institutions have several types of plastic in their assortment with different conditions.
When a person gets a loan from a bank, he is told the approved amount. The same thing happens with a credit card, after consideration, the client finds out how much he can spend on the account. However, unlike a consumer or home loan, the credit card limit can change during use.
To check credit card validity and eligibility, you can use a credit card checker. And it’s worth identifying the bank identification number for successful credit card transactions. You can use a bin code checker for the BIN number.