The Difference Between Credit Limit And Cash Limit Of A Credit Card


With more than 30 million credit card users, India is one of the countries with highest number of credit cards in use. Every month a significant number of new credit cards are being issued. While many users are aware of most of the terms associated with credit cards, there are still a few, especially the first time users, who are unaware of all the new terms and terminologies with respect to credit card. Among the many new terms, cash limit and credit limit are two which are little confusing to understand.

We here discuss the fundamental difference between the two terms and other things every cardholder needs to know about the same.

Here the complete Guidelines for Credit Card Limit.

What Is Credit Limit?

Credit limit or credit card limit is the maximum amount allowed for use on a credit card. Typically, credit card issuers do not allow the transactions beyond the credit limit. Any transaction above the credit limit hence gets declined due to lack of available limit on the card. However, there are a few credit cards that allow transactions over the limit. But the banks will levy an over limit charge for all the transactions.

Total Credit Limit And Available Credit Limit

These are the two terms which we usually come across when we try to check the balance on our credit card. Total credit limit and available credit limit on a credit card are different from each other. Total credit limit is the actual credit limit offered by the bank at the time of issuing the card. It remains the same throughout the card life unless the limit is enhanced or reduced.

Available credit limit, on the other hand, is the credit limit available for use at a given point of time on your credit card. Simply put, it is the difference between the total credit limit and the outstanding due amount on the card. For instance, if the total credit limit on a credit card is Rs.1 lakh and you have spent Rs.10,000 on the card, the available credit limit on the card becomes Rs.90,000. Now, you can spend only Rs.90,000 using your credit card not Rs.1 lakh.

As the spending on the card increases, the available credit limit decreases. Similarly, whenever the outstanding due on the card is repaid, the available credit limit automatically increases. Whereas, irrespective of the spending and repayments on the card, the total credit limit remains the same. Hence, whenever you are checking the balance on your card, don’t get confused between the limits.

What is cash limit?

While the credit cards primarily allow card transactions at point of sale terminals at retail outlets and online transactions, the cash advance or cash withdrawal using a credit card is a facility offered on most credit cards. Credit cards having the feature can be used at ATMs to withdraw cash. How much one can withdraw using a credit card is what is defined by cash limit.

Cash limit is the maximum amount of cash a credit cardholder can withdraw using a credit card. It is part of the total credit limit on a credit card but is not an additional amount available on the card.

Typically banks provide 20% to 30% of the total credit limit on a credit card as cash limit. For instance, if the total credit limit on a card in Rs.1 lakh and the cash limit is 30%, the cardholder can withdraw a maximum of Rs.30,000 using the card as cash and the remaining must be spent for card transactions only.

The Difference

Now that we know the definitions of both credit limit and cash limit, the difference between the two terms is simple. While credit limit is the total available credit on a credit card, cash limit is the amount of cash one can withdraw using a card. But cash limit is always a part of cash limit, not something in excess of it. Further, when there is cash withdrawal on a credit card, the same amount will be debited from the available credit limit on the card, while the total credit limit remains the same.

Hope you understand the basic difference between credit limit and cash limit on a credit card. Next time, when you check your credit card billing statement, there won’t be any confusion.