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Finance: What is a Credit Limit? 39 Views

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Description:

What is a Credit Limit? Financial institutions that lend money in the form of credit can do so in different facility configurations, usually with a line of credit and/or with a credit card. Each facility is part of a cumulative risk assessment of the borrower and is often capped with a Credit Limit in order to prevent the borrower from becoming over extended or if the account is subject to ID theft or other cyber crime. This affords both borrower and lender some protection, while allowing them other platform options to continue their business arrangement.

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Transcript

00:00
Finance, a la shmoop. What is a credit limit? Alright people well simply put the
00:08
maximum amount you get to charge or use on a loan or credit account, that's a [Credit limit definition written on a 100 dollar bill]
00:14
credit limit. So yeah it's that thing that keeps toddler Joey from ordering
00:17
two hundred thousand dollars worth of Snickers bars. [Toddler looking at the snickers bar]
00:20
If you accidentally you know leave out your Amex. (Illustrative example time) If you have a ten thousand

00:27
dollar line of credit or credit card you can't spend $20,000 on a trip to Vegas,
00:32
sorry. You might be able to go on a smaller trip to Atlantic City but once [Picture of Atlantic City]
00:36
you hit that 10 grand well the party's over until you pay some of that money [$10,000 flashing in red]
00:40
back, and by the way taking that smaller trip and then putting everything on red [Chips landing on a roulette table]
00:43
22 in hopes of funding your next trip to Vegas? Probably not the soundest
00:47
financial planning... sorry, let's keep it real. [Guy putting on a serious face]
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