Understanding Available Credit: What It Is + How to Use It

October 9, 2020

person looking at credit card and laptop

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Available credit is the amount of money you can charge to your credit card without going over the limit. It lets cardholders know how much money they have access to on their credit card. Available credit is calculated by subtracting the current card balance from the card’s total credit limit.

Available Credit vs. Credit Limit

While available credit depends on your current balance, your credit limit is the amount of total credit you have access to, regardless of what your balance is. It usually remains the same between billing cycles, unless your credit card issuer decides to increase or decrease your limit. So if you have a credit card with a $3,000 limit, your credit limit will remain at $3,000 limiting how much you can charge on the card.

Your available credit, however, fluctuates based on purchases and payments you make on the card. So if you make a $500 purchase on a card with a $3,000 limit, your available credit is now decreased to $2,500 and will not increase unless you make a payment on your balance.

The only time your available credit and credit limit are the same is when your balance is zero.

infographic about available credit vs. credit limit

4 Ways to Check Your Available Credit

It’s important to be aware of how much credit you have available so that you don’t end up using too much of your credit limit. There are many ways to check your available credit—on paper, online or over the phone.

infographic ways to check available credit

1. Billing Statement

If you receive paper billing statements, you’ll be able to find your available credit there. However, keep in mind that if you’ve made purchases or payments since the billing statement was printed, these won’t be reflected. Because of this, checking your billing statement may not give you the most accurate picture of your true credit availability.

2. Online Account

Perhaps the easiest way to check your available credit, purchase history and other account information is online. Whether you navigate to your financial institution’s website or download an app, all major banks and credit card issuers have made it easy to access your information whenever you need it. To avoid fraud or identity theft, make sure to set two-factor identification for any online logins.

3. Text Messages

Some banks and credit card issuers allow you to receive text updates on your total balance. Typically you’ll text a prompt and receive a reply with account information. Call your bank or check online to see if this feature is available. This is a good option if you don’t always have a solid internet connection and don’t want to make a call.

4. Card Services Number

Lastly, you may check your available credit by calling the number on the back of your credit card. You’ll be prompted to either enter your account information on your phone’s keypad or speak with a representative. They’ll give you the most up-to-date information on your card’s balance and available credit.

How Much of My Credit Should I Keep Available?

Lenders like to see that borrowers aren’t using too much of their total available credit. This is a sign that they rely heavily on borrowed money, which may signify a greater risk to the lender. For this reason, it’s best to keep your credit utilization—the amount of your total credit limit you’re using—fairly low.

Experts recommend staying below a 30 percent credit utilization rate. So if your credit limit is $1,000, aim to use only approximately $300 at a time. Another way of thinking about this is keeping 70 percent of your credit “available.”

If your available credit is zero, this means you’ve hit your total credit limit and should avoid making additional charges at all costs. Going above your credit limit hurts your credit score and will result in fines. A credit limit of zero may also mean your pending payment hasn’t cleared yet or that your credit account is delinquent. If you’re ever unsure of why your credit limit is zero, check your credit card statement or contact your card issuer’s customer service number.

If you’re striving to improve your credit score, great credit management is key. This means constantly being aware of your total credit limit, balance and available credit. By staying under 30 percent utilization and making consistent, on-time payments, you’ll be well on your way to achieving your credit goals.

If negative items are getting in the way of nudging your way to good credit, we understand and we can help. Lexington Law challenges questionable items like errors or unfair reporting to help repair your credit and get you back on the right track. Contact us today to learn more.

You have the will, we have the way. Let us help you fix your credit. Call today to get started

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