Answer:
The max you can safely charge on this card is $1,500 if the card limit is not utilized.
Explanation:
In order to understand this, first you must understand how credit limits work. Let’s assume that you use your credit card and pay $1,000 for your purchases. At the end of the month or the billing cycle (in many Banks and countries a billing cycle is usually one month), your Bank will send you a statement with details of the places where the card is charged, how much have been spent on each item, total amount spent, cushion available in limit and how much to be paid as a minimum payment to keep the account in good relation and avoid any penalty. If minimum payments are not made on time then Banks have a policy to charge penalty to the Credit card holder.
If the entire amount charged of $1,000 is paid in one time, then no interest will be charged because you have paid the debt within the fee-free grace period which is generally a month. As soon as the payment is processed, your credit line will be back to the full amount you’re allowed to borrow that is $1,000. This amount of $1,000 is also called your credit limit.
In case when interest fees will be charged, then the balance amount will roll over to the following month. For example:
Your credit limit is $1,000 and you charge $100 this month. Then you make a $30 payment and thus $70 revolves onto next month’s statement. Further a $3 interest fee will be added to the balance (assuming a 36% annual interest rate). The total cushion in your credit limit would be $926 ($1000 – $100 + $30 – $4 = $926).
In many countries Credit card interest rate is based on an annual rate e.g. 36%. In this way the monthly interest rate would be 3%. A billing cycle is usually of one month.
