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credit cards faq/glossary
The most common questions asked about Credits Cards.
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Credit Card Glossary
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L
 
Line of Credit
definition
What does Line of Credit mean?

When contract a loan which implies the use of a credit card, you will be assigned a line of credit as well. This line of credit is basically the limit above which you cannot have access to other amounts. For example, your line of credit might be of $1,000, and any time you withdraw money with the help of your card, next month’s balance will show that. Now, depending on the line of credit value, there will be a minimum monthly repayment you must make, otherwise late payment fees will incur as well. It pretty much is like a vicious circle if you skip/fall behind with one or two payments, that will accumulate interest and it will be very hard to pay it off.

A much higher line of credit (i.e. $10,000), as opposed to $1,000, will have generally much higher repayment requirements and a more expensive late repayment fee. You can basically choose between two types of credit line : the secured one, where you have as collateral your home for example (and these type of credit is safer for the lender), and the unsecured type which is directly linked to the use of the credit card.
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