ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A downside to high credit limits is that they can potentially lead to overspending to the point where you cannot afford your monthly payments.

Detailed explanation-2: -Yes, you can go over your credit limit, but there’s no surefire way to know how much you can spend in excess of your limit. Card issuers may consider a variety of factors, such as your past payment history, when deciding the risk of approving an over-the-limit transaction.

Detailed explanation-3: -With credit cards, there’s such a disconnect between making purchases and actually paying for them that you hardly even realize you’re spending money. You don’t feel the pain of the purchase the way you would if you were using cash, which is one of the reasons that people tend to overspend with credit cards.

Detailed explanation-4: -They are a form of revolving credit, or easy-to-get debt that can let you spend way more than what you have in the bank. Overspending like that can put you and any credit card co-signers-like your parents-on the hook for high interest charges and could wreck your credit score if you are unable to pay back the loan.