The difference between available credit and credit limit is closely tied to the account balance of a debt. Credit limit is the total amount of credit available to a borrower, including any amount already borrowed. Available credit is the difference between the credit limit and the account balance – how much you have left to spend, in other words.

Most credit card companies allow borrowers to increase account balances just beyond credit limits, provided that borrowers agree in writing. This sometimes is a result of charges and sometimes a result of interest and fees. Most credit card companies charge stiff penalties for accounts with balances above the credit limit – again, provided the borrower agrees to this in writing. In times of need, consumers may be tempted to sign any document that gives them access to needed cash.

The Consumer Financial Protection Bureau mandates amounts that credit card companies are allowed to charge for credit card accounts over the credit limit. The first time a balance exceeds a given credit limit, a charge of up to $25 may be applied. The second time a balance exceeds the credit limit within a six-month period, a charge of up to $35 may be applied. The charge applied may not exceed the amount the account is over the limit.

Individuals who have agreed to accept fees for exceeding credit limits have the right to change this at any time by notifying the lender in writing. This does not apply to transactions made before opting out of over-limit fees. Also, the lender is more likely to refuse transactions that take an account over the credit limit after a borrower has opted out.

  1. Is it possible to have a credit limit that's too high?

    Avoid these pitfalls when working with high credit limits, and learn how to increase your credit score by increasing your ... Read Answer >>
  2. How can I avoid paying unnecessary credit card fees?

    Examine different strategies for reducing fees on credit cards. Learn about the Consumer Financial Protection Bureau and ... Read Answer >>
Related Articles
  1. Personal Finance

    Should You Increase Your Credit Card Limit?

    Should you ask for a credit limit increase? The answer is yes, and there are several good reasons why.
  2. Personal Finance

    Why and How to Use Credit Cards Effectively

    When used responsibly, credit cards play a big role in establishing a good credit score that can help you obtain loans, mortgages and insurance.
  3. Personal Finance

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  4. Personal Finance

    Build Your Credit Score

    Here are four good ways to build your credit score when you're starting from scratch. Do it right and you'll end up with excellent credit.
  5. Personal Finance

    Should You Use Credit Cards To Fund Your Business?

    We give you 4 reasons to consider using a credit card instead of a business loan to fund your business, and how to be smart about it.
  6. Personal Finance

    4 Reasons To Increase Your Credit Card Limit

    It seems contrary to smart financial planning, but increasing your credit limit can actually be a smart move.
  7. Personal Finance

    Why Too Many Credit Cards Can Hurt Your Credit Score

    Find out why having too many credit card accounts can adversely impact your credit score if the cards are not managed properly.
  8. Personal Finance

    Is Your Credit Score at 850? It Can Be!

    Use these tips to increase your credit score and your ability to get low interest rates on loans.
  9. Personal Finance

    Time to Accept Credit Card Offers Again?

    How much you could get and whether to respond
  1. Credit Utilization Ratio

    The credit utilization ratio is the percentage of a borrower’s ...
  2. Credit Card Balance

    Credit card balance is the amount of charges, or lack thereof, ...
  3. Available Credit

    The unused portion of an open line of credit, such as a credit ...
  4. Good Credit

    A qualification of an individual's credit history that indicates ...
  5. New Balance

    The new balance is the sum of your previous balance, payments, ...
  6. Credit Exposure

    Credit exposure is the total amount of credit extended to a borrower ...
Trading Center