Limit

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Limit

Meaning:

A limit is the maximum amount of money you can spend, withdraw, or borrow from a credit card, bank account, or lending facility.

Types :

Credit Limit:

This is the highest amount you can borrow on a credit card or through an overdraft.

Debit Limit:

This is the maximum amount you can take out or transfer from your bank account.

Importance in Finance:

Limits help prevent overspending and keep your finances in check.

They help banks manage risks and can affect your credit score.

Good Financial Practice:

Keeping your credit usage below 30 percent of your limit helps maintain a strong credit score.

Role in Business:

Businesses have credit limits to buy goods, manage inventory, and keep cash flow smooth, even when they face shortages.