Consumption limit
A usage limit is a limit on how much usage a customer (private individual or business) can have within a certain period of time.
The word "spending limit" is often used in connection with Dankort/visa cards, which often have a spending limit of, for example, DKK 25,000 per week.
However, spending limits can also be used when granting credit or when a company issues consumer cards/debit cards.
What is the purpose of a usage limit?
The purpose of a spending limit is to ensure the owner or lender that the card/credit is not abused.
Basically, it is debatable whether a spending limit is necessary if, for example, no credit is granted by the bank and if the cardholder has large amounts of cash in their account. Here, the spending limit helps to protect the cardholder, as strangers can only misuse the card up to the spending limit and thus minimize any loss for the cardholder.
If credit is granted, the spending limit helps to protect the creditor/lender/creditor against losses, thus reducing the risk associated with credit.
Different types of usage limits
There are different spending limits depending on the type of card and the company issuing them.
For example, certain payment cards such as Visa and Dankort have different limits, and in some cases these also depend on the bank issuing them.
In some cases, there is also a difference between private individuals and businesses. For example, many businesses have no spending limit on their payment cards, while most private individuals have a limit.
Spending limit for credit purchases
Some companies also use the term "spending limit" in connection with the credit they issue to their customers. For example, a customer may have a spending limit of DKK 50,000.
This means that the customer can trade on credit for a maximum of DKK 50,000.
This is also called the credit limit or credit maximum.