Credit Limit Explained: How It Works, How to Use It Safely, and How to Grow It

A credit limit is the maximum amount you can borrow at a given time. It is not extra income, and it is not something you “should” use up. The safest way to use credit is to treat it as a tool for planned spending and short-term cash flow - then repay on time, ideally in full.

If you use Roarbank - an initiative by Unity Small Finance Bank Limited, start by understanding how your savings balance and your credit limit interact, because the combined total can determine whether a transaction is approved and whether you pay interest.

1) Credit limit basics (simple definitions)

• Credit limit: the borrowing cap set for you.

• Used credit card: the amount you have spent and not repaid yet.

• Available credit: credit limit minus used credit.

A practical rule: never borrow more in a month than you can comfortably repay by the due date.

2) When savings and credit are linked: what changes

On the credit limit page, the product is described as a 2-in-1 setup that lets you access savings and credit in one place. The important mechanics are:

• Spending is covered by your Savings Account balance first.

• After savings are used, you can continue spending up to your approved credit limit.

• You cannot exceed (Savings balance + Credit limit). If a payment is higher than the combined total, it is declined and you are notified.

Why this matters: your “real spending cap” is the combined total, not just the credit limit. A simple example on the page shows how a purchase can reduce savings first, then start using credit, and later a deposit into savings can bring credit usage back down.

3) Starter credit limit: how to use it without pain

The site explains that people without enough credit history may get a smaller starter credit limit, with the idea that timely repayments can improve eligibility over time.

To keep it stress-free:

• Use the starter limit for predictable expenses (one or two categories).

• Avoid running close to the combined cap.

• Repay consistently - missed payments matter more than “how much you spent”.

4) Interest-free period: what “up to 62 days” really means

The credit limit FAQ states an interest-free period of up to 62 days, including a 3-day grace period (noted as per RBI guidelines). The condition is also explicit: to stay in the interest-free period, you must repay the Total Amount Due (TAD) in full by the due date shown on your statement.

A good mental model:

• Statement date: when your bill is generated.

• Due date: your deadline to pay the billed amount. One on-page example shows a bill generated on June 1 with a due date of June 27 (described as 3 days before month-end).

• If you pay the full TAD by the due date, you pay zero interest on that billed amount.

Note: purchases made after the statement date typically fall into the next cycle - so your focus is paying the current statement’s TAD on time.

5) TAD vs MAD: the two numbers that change everything

The credit limit page defines:

• TAD (Total Amount Due): what you repay to stay interest-free.

• MAD (Minimum Amount Due): the minimum you must pay to avoid late payment charges and overdue classification.

MAD is described as the higher of:

• 5% of TAD, or

• interest charges + applicable penalties.

It also states minimum rules (for example, if MAD is less than ₹500 it becomes ₹500), and that unpaid MAD from a previous cycle can carry into the current cycle’s MAD. Translation: MAD can prevent “overdue”, but TAD is what usually prevents interest.

6) If you miss the due date: interest, fees, and credit score

The site states that after the interest-free period, interest applies at 39.6% per annum (3.3% monthly) on unpaid outstanding balance. It also states that if you do not pay at least MAD by the due date, your account becomes overdue (which can negatively affect your credit score) and a late payment fee applies at 2% of unpaid dues, with a minimum charge of ₹500.

If you ever fall behind, the fastest way to stop costs compounding is usually to bring the account current (clear the overdue amount, plus any interest that built up), then return to paying full TAD.

7) Growing your limit: what you can control

The credit limit FAQ states that eligible customers can receive a limit of up to ₹3,00,000, that the exact eligible limit is shown during application, and that limit increases may be reviewed periodically with your consent required.

Your best levers are boring - and effective:

• Pay on time (preferably full TAD).

• Avoid repeated overdue cycles.

• Keep spending at a level you can repay without strain.

Quick checklist

• Know your statement date and due date.

• Aim for full TAD to stay interest-free.

• Treat MAD as a last resort, not a plan.

• Track the combined cap: savings balance + available credit.

• Use reminders or autopay so “on time” becomes automatic.