A credit limit is the maximum amount a lender allows you to borrow, seen mostly in credit cards or lines of credit. It's a set dollar amount based on factors like your credit history and income. Staying within this limit is crucial to avoid declined transactions or fees. It's a flexible way to use credit, but surpassing the limit isn't allowed. Repaying at least the minimum due helps reduce the balance, and responsible use may lead to limit increases.

Knowing and sticking to your credit limit is key for budgeting, avoiding fees, improving credit, and managing debt. Understanding this limit ensures better financial planning and helps maintain a good credit score.