Why Your Credit Card's Available Credit Is Important

Every credit card has a maximum balance. Your credit card issuer gives you a credit limit, which is the highest outstanding balance you can have on your credit card at any given time. As long as you remain on good terms and stay under your credit limit, you can keep making purchases up to this maximum amount.

What Is Available Credit?

Staying within your credit limit means knowing your available credit at all times. Depending on your credit card terms, you may face a penalty for going over your credit limit, or your card issuer may simply stop accepting new charges.

Your available credit is the amount of your credit limit you can still use for purchases. The amount changes when your balance and credit limit change. If your available credit is $0, it means you don't have any credit for making purchases. This can happen if you've maxed out your credit card, your payment hasn't cleared, or your credit card payment is delinquent.

Cash advances are often treated separately from your purchases balance and may have a lower available credit amount.

Having a balance on your credit card would make your available credit lower than your credit limit. Pending transactions that haven't posted to a credit card will further lower your available credit. For example, if your credit limit is $2,000 and you have a balance of $500, then you would have $1,500 of available credit. A pending transaction of $100 would reduce your available credit to $1,400.

There are a few ways you can check your available credit:

  • Call your credit card issuer via the number on the back of your credit card.
  • Log into your online account through your computer or mobile browser.
  • Download your credit card issuer's mobile app to check your available credit and other account details.

Your credit card billing statement isn't the best place to check your available credit because it won't include any transactions that have posted to your account since your billing statement was printed.

The Importance of Having Available Credit

The more available credit you have, the better. Having a lot of available credit is good for your credit score because it makes you seem less risky to lenders. A lower balance means your credit utilization ratio, which accounts for 30% of your credit score, will also be low. In general, it's best to keep your credit card balance below 30% of your credit limit. On a credit card with a $1,000 limit, that means you would want to keep your balance below $300, leaving you with $700 of available credit.

The less available credit you have, the less valuable your credit card is to you. You won't be able to use your card when you need it, for example, to rent a car or book a hotel. Your only other option would be to use your debit card, and some transactions require a security deposit or extra verification when you use a debit card.

What Happens If You Use More Than Your Available Credit?

Transactions over your available credit will usually be declined unless you've given permission to have over-the-limit transactions processed. Opting in allows your credit card issuer to process transactions that would put you over the credit limit. However, it also puts you at risk of incurring an overlimit fee or a penalty rate, if your credit card issuer has these features. 

Your available credit can actually be negative if you have exceeded your credit limit.

Increasing Your Available Credit

Your available credit doesn't reset, but it does adjust when your payments post to your account. As you make payments on your credit card, you'll free up more available credit. Note that it could take a few business days for the payment to reflect in your available credit, depending on your credit card issuer's payment posting policy. If you're trying to free up some credit for a large purchase, you may need to make a payment several days in advance of the purchase. 

Another way to increase your available credit is to request a credit limit increase. Once you make the request, your credit card issuer will review your account and credit history to determine whether you qualify. You'll still have the same amount of debt, but if approved, the credit limit increase will raise your available credit. Factors that will influence your eligibility for a credit line increase include the age of your account, your payment history, and changes to your income.

Key Takeways

  • Your available credit reflects the difference between your credit card limit and your card balance.
  • If you don't have very much available credit, your purchases may be declined.
  • If you allow your card issuer to permit charges beyond your credit limit, you may be charged a fee and receive a penalty rate.
  • Your available credit, combined with your card balance, forms your credit utilization ratio, one of the most important factors on your credit report.
  • You can raise your available credit by paying down your balance or getting your card issuer to increase your credit limit.

Article Sources

  1. CreditUnion.gov. "Understand Your Credit Card Statement," Accessed June 12, 2020.

  2. Experian. "What Is a Credit Utilization Rate?" Accessed June 12, 2020.

  3. Consumer Financial Protection Bureau. "I Went Over My Credit Limit and I Was Charged an Overlimit Fee. What Can I Do?" Accessed June 12, 2020.

  4. Consumer Financial Protection Bureau. "1026.56 Requirements for Over-the-Limit Transactions," Accessed June 15, 2020.

  5. Capital One. "Credit Line Increase FAQ," Accessed June 15, 2020.