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What is the difference between current balance and available credit?

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    If you use a credit card, there are certain things that are helpful to keep track of over the course of the month as you approach the end of your billing cycle. These include things like the due date of your bill and what your interest rate (Annual Percentage Rate or APR) is if you decide to carry a balance. Moreover, you should always keep a pulse on your current balance and your available credit — which are the two things we’ll focus on in this article.

    The primary difference between the current balance and available credit is that the current balance reflects the amount you currently owe, while the available credit represents how much credit you have left to use on your card.

    For example, if your credit card has a limit of $3,000 and your current balance is $1,000, your available credit may be $2,000. This means you can continue to make purchases or transactions up to $2,000 without exceeding your credit limit (unless you make a payment toward that balance before then).

    Below, we break this down further.

    What does current balance mean?

    The current balance on your credit card is the total amount you owe to the credit card. It includes all purchases, cash advances, fees and any interest charges accrued, as well as any other outstanding charges.

    Your current balance is a snapshot of your outstanding debt at a specific moment in time and can change daily as you make purchases, payments and other transactions.

    You can usually find your current balance by logging into your credit card issuer’s mobile app or website to access your account information.

    What does available credit mean?

    Available credit represents the maximum amount of credit that the credit card issuer is willing to extend to you. It is the difference between your credit limit (the total max amount you can charge on the card) and your current balance.

    As you make purchases using your card, the cost of each purchase is subtracted from your credit limit. The amount you're left with is known as your available credit.

    Should you use your available credit?

    While it's fine to use your available credit, it is important to monitor both your current balance and available credit, as well as your available funds to pay at least the minimum payment due at the end of each billing cycle.

    Exceeding your credit limit can result in penalties, fees and potentially damage your credit score. It’s wise to keep your credit card balances well below your credit limit and pay your monthly statement in full and on time to avoid interest charges.

    Can you increase your available credit?

    Yes, you may be able to increase your available credit in the following ways:

    • Pay down existing balances: Reducing your credit card balances will increase your available credit. You can even pay off your balance before the due date. Also, as your outstanding balances decrease, your credit utilization ratio (the percentage of credit used compared to your credit limit) decreases, which can positively impact your creditworthiness. Aim to keep your credit utilization ratio below 30% to maintain a healthy credit profile.
    • Apply for a new credit card: Getting approved for a new credit card can increase your overall available credit. When approved for a new card, you’ll be given a credit limit on that card in addition to your existing credit limits. Be mindful of the potential impact on your credit score, as a new credit application will likely result in a hard inquiry, which could cause a dip in your score.
    • Request a credit limit increase: Contact your issuer and request a credit limit increase. Many credit card companies allow cardholders to request higher credit limits online or by calling customer service, especially if your income has recently increased. Be prepared to provide information about your income, employment and financial situation when making this request. Creditors may use this information to assess your ability to manage additional credit responsibly.

    In summary

    Remember, increasing your available credit doesn’t mean you should increase your spending. It’s essential to use any additional credit wisely and avoid accumulating high balances that you can’t repay in full each month. Responsible credit management, including on-time payments and low credit card balances can make a positive impact on your credit score and your financial health overall.

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