What is available credit, and how does it work?
Your available credit is the amount of money you can still spend on your credit card—it's your credit limit minus your current balance.
The amount of available credit you have can fluctuate based on things like your purchases and card payments.
Understanding your available credit and how it works can help you avoid exceeding your credit limit—which can lead to fees or declined purchases, depending on the card issuer. It also plays a role in determining your credit scores and overall creditworthiness.
What you’ll learn:
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The available credit on a credit card is your credit limit minus your current balance.
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Having more available credit across all your revolving credit accounts can help you keep your credit utilization ratio low. And this could help improve your credit scores.
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Depending on your credit card issuer, going over your available credit could lead to extra fees, declined purchases or even a closed account.
- Capital One never charges cardholders for going over the limit on their credit card balances. View important rates and disclosures.
How to calculate available credit
To calculate the available credit on your credit card, subtract your card’s current balance from its credit limit. Your available credit decreases as you make purchases with your card. If you pay off your entire balance, your available credit should equal your credit limit—the maximum amount you can spend on your credit card account.
After making a payment, the amount of credit available may not be immediately updated. This is because it can take one to five days for the payment to process, depending on the issuer. Knowing how much available credit you have on your card can help you avoid overspending, which could result in penalties and fees. It could also affect your credit.
Available credit example
To understand how to calculate available credit, it might help to look at an example. Suppose you have a credit card with a $10,000 credit limit. After paying for groceries, gas and other items, you’ve spent $1,500. That’s the card’s current balance, which means your available credit is $8,500.
If you’re carrying a balance of $500 from the previous month, that amount is also subtracted from your available credit. This would bring your available credit to $8,000.
What impacts your available credit?
Your available credit changes, depending on certain factors such as:
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Purchases: As you make purchases with your card, the available credit you have decreases.
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Interest: Interest can be charged on purchases when you carry a balance. These charges are added to the account each month, decreasing your available credit.
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Pending charges: A pending charge—a transaction that hasn’t yet been processed and doesn’t affect your account balance—typically affects your available credit.
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Payments: Making payments on your account can increase your available credit.
- Fees: Fees can be added to your current balance, decreasing your available credit.
How does available credit affect your credit scores?
Available credit can play a role in determining your credit scores and creditworthiness in a few ways, including:
Credit utilization ratio
Your available credit may affect your credit scores because, as your current balance goes up, so does your credit utilization ratio. This ratio compares the credit you’re using across all your revolving credit accounts to the total credit you have available.
Credit-scoring companies like FICO® and VantageScore® consider your credit utilization ratio when calculating your credit scores. A low credit utilization ratio can show that you’re responsible with credit and spending, and it can help your credit scores. On the other hand, a high credit utilization ratio can have a negative impact on your scores.
Debt-to-income (DTI) ratio
Creditors also look at your DTI ratio when making lending decisions, which is influenced by your available credit. Your DTI ratio is calculated by comparing how much debt you currently have in relation to your monthly income. Carrying a balance on your credit card can negatively affect your DTI ratio, which can impact your ability to secure new lines of credit.
Creditworthiness
Creditors might look at certain factors related to your available credit when making lending decisions. For example, lenders could take into account information from your credit reports, such as:
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How often you exceed your credit limit
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How often you make payments that are over the minimum amount due
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Changes in your credit card’s balance
What happens if you go over your available credit?
If you go over your credit limit, the card’s credit utilization will exceed 100%. This can have a negative impact on your credit scores. And there could be consequences from your card issuer. Here’s what could happen:
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Charged fees
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Declined purchases
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Increased interest rates
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Decreased credit limit
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Closed accounts
Available credit for Capital One cardholders
If you’re an eligible Capital One cardholder, you may be able to exceed your credit limit. If your account has access, you could use the Confirm Purchasing Power tool before making an over-limit purchase to check whether it may be approved. You can also disable the ability to spend over your credit limit in your over-limit preferences.
It’s also helpful to know that if you’re a Capital One cardholder, you’ll never be charged fees for exceeding your credit limit. View important rates and disclosures.
Available credit FAQ
If you’re still curious about available credit, the answers to these questions might help.
How much of your available credit should you use?
The Consumer Financial Protection Bureau (CFPB) suggests keeping your credit utilization ratio below 30%. That means if you have a $10,000 credit card limit, your balance should stay below $3,000.
Some cardholders may pay off their credit card early to free up available credit and try to improve their credit scores.
Current balance vs. available credit: How do they compare?
The current balance is the most up-to-date amount owed on the card. Every time you swipe your credit card, the purchase is added to the current balance. As your current balance grows, the amount you have left to spend—your available credit—shrinks.
The current balance is different from the statement balance, which is the total amount owed at the end of the card’s billing cycle.
Can I use all my available credit?
Yes. But using all your available credit can impact your credit scores. That’s why the CFPB recommends using less than 30% of your credit limit.
Why is my available credit less than my credit limit?
You can think of your card’s available credit as your credit limit minus your current balance. If you have outstanding charges, they will reduce your available credit. Say you have a $10,000 credit limit. If you spend $1,000, your available credit will drop to $9,000.
Your available credit might be the same as your credit limit at the beginning of the billing cycle if you don’t carry a balance.
Key takeaways: What does available credit mean?
A credit card’s available credit is generally how much the cardholder has left to spend. You can calculate your available credit by subtracting your current balance from your credit limit.
Looking to increase your overall available credit? You can start by seeing if you’re pre-approved for a Capital One credit card. Checking is easy, and it won’t hurt your credit scores.
