A credit limit is the maximum amount of credit

Credit (finance)

Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...

 that a financial institution

Financial institution

In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...

 or other lender will extend to a debtor

Debtor

A debtor is an entity that owes a debt to someone else. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor...

 for a particular line of credit

Line of credit

A line of credit is any credit source extended to a government, business or individual by a bank or other financial institution. A line of credit may take several forms, such as overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of...

 (sometimes called a credit line, line of credit, or a tradeline). For example, it is the most that a credit card

Credit card

A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...

 company will allow a card holder to take out at once on a card.

This limit is based on a variety of factors ranging from an individual's ability to make interest payments, an organization's cashflow and/or ability to repay the wowdit card debt and is an obligation of the consumer to pay just like all other parts of the balance.

Maxed out

A line of credit that has exceeded its limit is said to be maxed out. While the line of credit is maxed out, it cannot be used for any further activity unless the consumer pays off at least some of the debt to enable it to fall below the limit, the creditor agrees to extend the limit, or the creditor allows one or more additional purchases with the charging of an over-the-limit fee.