What is a credit limit? How it works and what factors affect it

Date posted:

Updated date: 08/28/2025
What is a credit limit? How it works and factors that affect it - 2

Index

1. What is a credit limit?

1.1. Definition of credit limit

A credit limit is the maximum amount of money a bank or financial institution allows an individual or business to borrow or spend over a given period of time. This limit can apply to a credit card, personal loan, or business line of credit.

For example, if your credit limit is 100 million VND, you can spend or borrow up to that limit. If you use 50 million VND, the remaining balance is 50 million VND until you repay part or all of the loan.

1.2. What is a credit limit?

A line of credit is a form of flexible credit in which the bank provides a maximum amount of money that the customer can use multiple times within a period of time without having to re-borrow.

For example, if a business is granted a credit limit of 1 billion VND, they can use 500 million to import goods. When they repay the loan, they can continue to withdraw more money from the remaining limit without having to apply for a new loan.

Line of credit is often applied to businesses to support short-term working capital needs. Import-export companies, distributors, and retailers often use line of credit to ensure flexible cash flow for business operations.

What is a credit limit?

2. What is a credit card limit?

2.1. How does a credit card limit work?

A credit card limit is the maximum amount of money a cardholder can spend in a billing period without having money available in the account. This is the amount of credit that the bank grants you based on your creditworthiness and financial capacity.

When you use your card to make purchases, pay for services or withdraw cash, the amount used will be deducted from your credit limit. When you pay off the outstanding balance, this limit will be restored and you can continue to use it for future transactions.

For example: If you have a credit card limit of 50 million VND, you can use this amount to spend. If you buy goods or pay for services with a total value of 20 million VND, the remaining limit is only 30 million VND. If you pay the full 20 million on the payment date, the limit will be restored to 50 million VND.

Additionally, if you only pay part of the minimum balance (e.g. VND 5 million), you will be charged interest on the remaining balance (VND 15 million) and your credit limit will only be restored in proportion.

2.2. Types of credit card limits

Personal credit limit: For individuals based on income, credit history and ability to repay.

Business credit line: Granted to companies based on financial statements, revenue and solvency.

3. What is the credit card limit?

Your credit card limit is the amount of money left in your credit line that you can continue to use to spend, make purchases, or withdraw cash. This number will vary depending on how much you have used and how much you have paid.

How to calculate available limit

Available Limit = Initial Credit Limit – Amount Used + Amount Paid

For example: If your credit card has a limit of 100 million VND and you have spent 40 million VND, the remaining available limit is 60 million VND. If you pay 20 million VND, the available limit increases to 80 million VND.

Factors affecting available limits

Credit card spending: Each time you swipe your card, your available limit is reduced by the amount you have used.

Credit card installments: If you sign up for installments, your available limit will be deducted according to the monthly installments.

Fees and interest: Some banks deduct annual fees, cash advance fees, or interest from your available limit.

Unrecorded Payment: If you've just paid a debt but the bank hasn't updated it yet, your available limit may not change immediately.

Factors affecting available limits

4. What is a temporary credit limit?

A credit hold is an amount of money that is temporarily “frozen” in the credit line due to a pending transaction.

For example, when you book a hotel room or rent a car, a hold may be placed on your credit card as a security deposit. The funds are released once the transaction is completed or canceled.

5. How to increase credit limit

5.1. Payment on time

A good payment history is an important factor in increasing your credit limit. The bank will review your payment behavior before approving a limit increase.

5.2. Increase income

Banks often require proof of income when approving credit limits. If you have a higher income or a more stable source of income, your chances of getting a higher limit will be higher.

5.3. Maintain good credit score

Your credit score is a measure of your financial standing. If you maintain a high credit score by paying your bills on time and not taking on too much debt, banks will have an easier time increasing your credit limit.

Learn how to increase your credit limit

6. Notes when using credit limit

Don't max out your credit limit: Using your entire credit limit can affect your credit score and your ability to get a limit increase in the future.

Pay your balance on time: To avoid penalties and high interest rates, pay at least the minimum amount each period.

Control your spending: Use your credit card strategically to avoid getting into bad debt.

Update your credit information: Check your credit limit and balance regularly to avoid overspending or identity theft.

7. Banks with good credit limit policies

Each bank has a different credit limit policy. Below are some banks with preferential credit limit policies:

Vietcombank: Credit card limit from 10 million to 1 billion VND, interest rate from 18%/year.

Techcombank: Limit from 20 million to 1 billion VND, 45 days interest free.

BIDV Bank: Limit from 10 million to 500 million VND, preferential installment payment 0%.

VPBank: Flexible limits, quick approval.

HSBC Bank: International credit card with high limit, suitable for customers with stable income.

LiveTrade Pro has helped you understand What is a credit limit?? A credit limit is an important financial tool that helps individuals and businesses spend and invest more flexibly. Understanding your credit limit, how to manage it and make smart use of it will help you avoid bad debt and optimize your personal finances. If you need to increase your credit limit, make sure to maintain a good payment history, increase your income and keep your credit score high so that the bank can consider increasing your limit.

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Livetrade.vn only provides technology solutions, not a trading platform. LiveTrade Pro is a tool for training & simulation. We do not give investment recommendations.

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