Which term describes the maximum amount you can borrow on a credit account?

• A. Interest Rate
• B. Credit Limit
• C. Grace Period
• D. Balance

Answer: (B)

The maximum amount you can borrow on a credit account is the credit limit. This is set by the lender and represents the total borrowing you’re allowed at one time. As you use the card, your balance grows toward that limit, and if you try to spend more than it, the purchase might be declined. The amount you still can borrow is called available credit, which is the credit limit minus your current balance.

Other terms to know: the interest rate is how much extra you pay to borrow money, usually shown as a percentage. the grace period is a time after your statement date during which you can pay the full balance without paying interest. the balance is the amount you currently owe.