What Does Available Credit Mean?
If you own a credit card, your available credit is something you will want to keep an eye on at all times. Learn what available credit is, how it’s different from your credit limit, and why it’s so important.
Available credit is just as it sounds—it’s the amount of credit on your card that’s available for you to use on purchases. You can figure this number out by subtracting your current balance from your credit limit.
For example, if your card’s credit limit is $1,000 and you’ve charged $200 to it, you have $800 available credit left.
Put simply, if you have a credit card and plan to make purchases, you must have unused credit available to do so. And that’s exactly what your available credit is.
Credit Limit vs. Available Credit?
It’s important to understand and be aware of both your credit limit and your available credit at all times.
A credit limit, or credit line, is the maximum amount of credit an issuer extends to a cardmember—it’s the ceiling of what you can spend with your card. Issuers may use multiple criteria to determine your credit limit, including but not limited to your credit score, income, credit history, and payment history.
Available credit, as mentioned above, is the amount of your credit limit that you have available to spend. Your available credit can go up or down, depending on your account activity: the more purchases you make with your card, the less available credit you will have. And the fewer purchases you make—or the more of your balance you pay off—the more credit is available to you.
Keeping tabs on these numbers is an important step in ensuring you don’t spend over your limit. Doing so could lead to purchases being declined, negative impacts on your credit score, increased interest rates, or even losing access to your credit.
How to Increase Your Available Credit
There are a few things you could do to increase the available credit on your card.
One way is to pay your balance. Each time you pay down your balance, you open up more credit to use … at least until you use that available credit on another purchase and start the whole process over again.
Another way to increase your available credit is by increasing your credit limit—the higher the credit limit, the more available credit there can be. A credit issuer may offer you an increase or even automatically apply one, assuming good standing with your account such as timely payments, a healthy credit utilization ratio, or even getting a higher-paying job. Or you can contact your issuer and ask for an increase.
A third way to increase your available credit is to get another credit card. Along the same lines as a credit line increase, being approved for another card—on top of the card or cards you already have—means more credit at your disposal. However, before you start applying for new cards left and right, be sure to consider the potential impacts doing so too often can have on your credit.
Regardless of how you increase your available credit, always remember that you must pay any resulting debt. The more available credit you have, the more opportunity there is for you to accrue higher debt. So be mindful of how you spend and always have a plan to pay that debt off.
If you have a credit card, knowing your available credit at all times is key to maintaining healthy finances. Not only will you be aware of what your spending limits are, but you’ll also be able to protect your credit score in the process.