These verbs – credit and debit – seem to confuse people. So let’s see if one shall be happy if the bank teller checks their account and says for example:
The full amount of the purchase has been credited to your account.
Surely, as it means that the full amount has been added to the account. As a noun used by accountants credit means an addition to certain accounts.
On the other hand we have a verb debit and the incoming example. Merchant has recently refunded a purchase price of 123 USD to one of his customers but cannot see it in his billing statement, therefore asking the acquiring bank if his refund was successful. The acquiring bank replied:
The merchant has been debited on 12.03.11 with the amount of 123 USD.
So the money have been withdrawn from the merchant’s account and the refund was handled properly.
When a bank account has a positive or debit balance,it means the bank owes money to the customer; and if it has a negative or credit balance – the customer owes money to the bank.
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Credit card – a plastic card (usually 85.6 × 53.98 mm ) which allows its owner to spend money on goods and services. It is possible to spend or withdraw money up to a certain limit.
The card issuer creates a revolving account and grants the cardholder a line of credit. After that the cardholder may borrow money to pay a merchant.
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Line of credit is an arrangement between a financial institution and a customer. In other words these are the terms of a credit. They define a maximum loan balance that the borrower will be allowed to maintain.
The terms offered to a customer depend on many factor like, for example, his credit history.
How does it differ from a loan?
Usually there are several advantages over loans:
- the application process is simpler (also the approval takes days, not weeks)
- a customer (borrower) can draw money at any time (of course if the credit limit is not exceeded)
- a customer isn’t charged on the money that wasn’t used
- there is more flexibility in repayments
Terms, which can mean the same: tradeline, credit line, LOC
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Credit limit is the maximum amount of credit that a certain financial institution will extend to its costumer. Usually this term is used in two cases:
- a bank extends credit to its costumer,
- a credit card company extends credit on a single credit card.
What does it really mean?
A credit limit is simply the amount of money which a customer (debtor) is allowed to take on a particular line of credit (which is the commitment between a bank and its client).
Actually the second case is rather more often. Here a credit limit is the maximum amount of money that the owner (the cardholder) of the particular credit card can take out on this card. This means he or she can buy goods or services only until reaching such limit. After that the debt must be paid in order to use the credit card again.
The limit itself is based on many factors including the lenders cashflow, the debtors ability to pay his debts etc.
Terms, which can mean the same: credit cap
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