What does the term 'credit limit' refer to?

The term 'credit limit' specifically refers to the maximum amount that a borrower can spend or withdraw using a particular credit card or line of credit. This limit is set by the financial institution based on various factors such as the borrower's creditworthiness, income, and credit history. Understanding the concept of a credit limit is crucial for consumers as it helps them manage their credit responsibly and avoid overspending, which could lead to financial difficulties.

The other options describe different financial concepts. The amount of cash available in a bank account pertains to checking or savings balances, not a credit limit. The annual fee is a cost associated with maintaining a credit card and varies by card type but is not related to the limits on borrowing. The interest rate applies to loans, indicating the cost of borrowing, rather than the amount that can be borrowed itself. Thus, recognizing the correct definition of 'credit limit' is essential to understanding overall credit management.