What is a Credit Line on a Credit Card

What is a credit line on a credit card? A credit line is a facet of a credit card which allows you to spend a certain amount of money. It is also known as a credit limit. Let’s imagine you have a credit limit of $3,000. This means that you can spend up to this amount at any time for transfers, purchases or the like. However, you may not exceed this limit. When the credit limit has been reached, the card is often said to have been ‘maxed out’.Choose the best credit card at DontSpendMore.com

This means that you can make no further purchases using the card until you have paid off some of the debt. However, this is not always the case. In other cases the lender may agree to extend the credit line, or the lender can agree to allow you to make an extra purchase, stipulating that you will be charged a fee for going over the credit line.

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An advantage of a credit line is that it is a flexible way of borrowing which can allow for unexpected but necessary purchases. This distinguishes it from a normal loan, where you borrow a set amount of money in advance. With a credit line you can borrow money as and when it is needed up until the card s maxed out.

So, what is a credit line on a credit card? The credit line is decided by a number of factors. One factor is the borrower’s ability or ‘track-record’ when it comes to paying back debts or loans. Thus, your credit rating will affect how high your credit limit is. Similarly, if you are using a business credit card rather than a personal one the ability of the organisation in the past to pay back debts and loans will be taken into account when deciding upon the credit line placed on the card.

A bank will often charge more for a credit line than for a fixed loan, but the borrower will only be charged interest on the amount of money which has been borrowed and not payed back. However, the borrower may be liable to pay an ‘unused line fee’ which is an annual fee you may be charged on the money which has not been withdrawn.

Therefore, credit lines can be very useful given certain circumstances, but it is useful to know whether you are likely to go over the line and how effectively you are going to be able to pay back money under your credit line before you choose to get one.

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