Limit

Meaning: 

Credit Limit:

This is the maximum borrowing allowed on a credit card or through an overdraft.

Debit Limit:

This is the maximum withdrawal or transfer allowed from a bank account.

Importance in Finance:

Limits are important because they help prevent overspending and ensure responsible borrowing.

They help banks manage risk and can influence your credit score.

Good Financial Practice:

It is advisable to keep your credit usage below 30 percent of your limit to maintain a strong credit score.

Role in Business:

Businesses receive credit limits to purchase goods, manage inventory, and maintain smooth cash flow, even during times of shortage.