What is available credit and how does it work?

To understand available credit, it might help to think about it like you’re borrowing cash from a friend. Say your friend loans you $10 and you spend $4. The original $10 you borrowed is like your credit limit. The $4 you spent is your current balance. And the $6 you have left is your available credit.

With these concepts in mind, it’s important to know what your available credit is on your credit cards. Read on to learn more about available credit and how it can impact your credit scores.

Key takeaways

  • Available credit is what’s left of a card’s credit limit after subtracting the current balance.

  • Having more available credit across all your revolving credit accounts can help you keep your credit utilization ratio low. And this can impact your credit scores.

  • Depending on your issuer, going over your available credit can lead to extra fees, declined transactions or even a closed account.

  • Capital One cardholders are never charged overlimit penalties on credit card balances. View important rates and disclosures.

What does available credit mean?

Your available credit is the amount of credit you have left to spend on a credit account. You can calculate your available credit by subtracting your card’s current balance from its credit limit

Your available credit decreases as you make more purchases. If you pay off your entire balance, your available credit will be equal to the account’s credit limit at the start of each billing cycle.

Knowing how much available credit you have can help prevent overspending, racking up annual percentage rate penalty costs and raising your credit utilization ratio.

Current balance vs. available credit

As you swipe your credit card, each purchase is added to a running total called the current balance. This is the most up-to-date amount owed on the credit card. As your current balance grows, your available credit shrinks.

Keep in mind that the current balance is different from the statement balance, which is the total amount owed at the end of the billing cycle.

Credit limit vs. available credit

The credit limit is the maximum amount you can spend on a credit card account. Credit limits are set by credit card issuers based on things like the cardholder’s credit history, income and other card balances. How much of your credit limit you have left to spend is your available credit.

How does available credit work?

Let’s say you have a credit card with a $10,000 credit limit. After paying for groceries, gas and other items in your budget, you’ve spent $1,500. That’s the current balance. Now your available credit is $8,500. And if you were already carrying a balance from the previous month, that amount is also subtracted from your available credit.

How does available credit affect your credit scores?

As your current balance goes up, so does your credit utilization ratio, which compares the credit you’ve used to the credit you have left across all revolving credit accounts in your name.

Credit-scoring companies like FICO® and VantageScore® consider your credit utilization ratio when calculating credit scores. A low credit utilization ratio can show that you’re responsible with credit and spending.

Generally speaking, more available credit can lead to a lower credit utilization ratio and a positive impact on your scores.

How much of your available credit should you use?

The Consumer Financial Protection Bureau suggests keeping your credit utilization ratio below 30%. That means with a $10,000 credit card limit, the balance should stay below $3,000. 

Some cardholders may also pay off their credit card early to free up available credit and try to improve their credit scores.

What happens if you go over your available credit?

Spending more than your available credit will put you over your credit limit and may have consequences.

Eligible Capital One cardholders may be able to exceed their credit limits. If your account has access, you can use the Confirm Purchasing Power tool to check whether an overlimit purchase may be approved. You can also disable the ability to spend over your credit limit in your overlimit preferences.

Whichever option you choose, just know that Capital One cardholders are never charged fees for exceeding their credit limits. View important rates and disclosures.

Other issuers may handle limits differently. If you go over your credit limit, your card could be declined. Repeatedly going over your available credit could lead to a higher interest rate, a credit limit decrease or even a closed account. If you think you need more credit, you can try to increase your credit limit.

Available credit FAQ

If you’re still curious about available credit, the answers below might help.

Yes. Available credit is part of your credit limit, which is how much your issuer will loan you in credit. Keep in mind that using up your available credit can impact your credit scores. Experts recommend using less than 30% of your credit limit.

Yes, available credit is how much of your total credit limit you have left to spend. If you only spend your available credit, you can avoid overlimit fees.

You can think of available credit as your credit limit minus your current balance. If you have outstanding charges on your credit card, they will reduce your available credit.

Your available credit might be the same as your credit limit—say $10,000—at the beginning of the billing cycle if you don’t carry a balance. But if you spend $1,000, your available credit will drop to $9,000.

According to the Office of the Comptroller of the Currency, issuers can decide when to replenish an account’s available credit. Even if you pay off your balance by the due date, it might take a few days before that credit is available again.

There could also be a problem with your payment. If you’re waiting longer than expected, consider contacting your issuer.

If you need available credit by a certain day, it’s a good idea to make a payment several days beforehand. Capital One lets cardholders choose their payment due date. This could help you pay off the card and access your available credit again on a schedule that works for you.

Available credit in a nutshell

If you’re wondering how much of your credit card limit you have left to spend, that’s available credit. You can determine the amount by subtracting your current balance from your credit limit.

Keep in mind that using less than 30% of your available credit could help your credit scores. But credit utilization is just one piece of your credit history and activity. Learn more about how to maintain a good credit score.

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