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Understanding Credit Limits: Is My Credit Limit For A Month or Year?

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Know Your Limits Before You Get In Over Your Head

We receive lots of questions here at CreditSmart everyday, some simple, some complex. Some like this one are quite basic and reinforces the fact that so many people out there do not yet have a baseline understanding of how credit limits work.


From: Sya*********.G 
Subject: Question regarding credit limit

Message Body:
Want to know whether the Credit limit mentioned is for monthly basis or annual basis.


The answer is, a credit limit does not have a time frame attached. Your credit limit is your limit – and you can max it out by making one large purchase or lots of small ones. Each month if you do not pay in full, interest is added to what you owe. Subtract your account balance from your stated credit limit and that is how much credit you have left to work with.

Just because you have available credit does not mean you should use it all, in fact quite the contrary. Being credit smart means utilizing just a small amount of your available credit and trying to pay in full each month.

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