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Credit Limit
Explanation:
The maximum amount you may charge on your credit card. Some credit cards have different limits for purchases and cash advances.
Your credit line is closely tied to your credit standing and income. Issuers are more likely to trust you with a lot of spending power if you have a history of paying your financial obligations on time and are likely to have plenty of disposable income to make payments in the future.
Our Thoughts:
Ironically, the more credit you have available to you, the faster your credit standing will rise. Many consumers therefore open secured credit cards and add to their refundable deposits over time in order to take advantage of the fact that a secured card's deposit actually serves as its credit line. You only have direct control over your credit limit when using a secured credit card.
You can always ask a credit card company to increase your limit on an unsecured card, but they have no obligation to do so and are only likely to do so if they're legitimately concerned about losing you as a customer or your card use merits it. Conversely, credit card companies reserve the right to reduce your credit limit if you fall behind on your bills. You may request that it be restored to original levels after six months of on-time payments.
Having the highest possible credit limit is also important given that credit utilization -- how much of your available credit you use every month -- impacts your credit standing as well. "Maxing out" your credit cards can hurt your credit score, so try to keep at least half of your credit limit available as unused credit on each of your credit cards.
Finally, it's important to note that spending beyond your credit limit and incurring costly fees and interest as a result is less of a concern than it once was. The CARD Act requires you to opt-in for the ability to exceed your credit limit, which is helpful in emergency situations but should be avoided if you have a history of going over limit or you simply do not trust yourself.