Question

What is the debt-to-credit ratio of the Handy Hardware Credit Card?

Answer 1

step 1: add the amounts of your outstanding balances on your cards
EX: $1500+$1000+$500=$3000
step 2: add the amount of your creedit lines on your cards
EX: $6000+$3500+$2500=$12000
step 3: divide your total debt by your total credit
EX: $3000/$12000=25% or 0.25

Answer 2

Debit to credit ratio is the ratio of amount of credit you are using divided by the total amount of credit you are eligible to use.

Explanation:

Consider that you have a credit card issued to you by bank. Now its credit limit is $10,000. Up to now, you have spent $4000, your debit to credit ratio will become:

= (4000/10000)*100

= 40%

Now credit is the amount of money, equivalent to which, goods can be purchased with promise of future payments.

whereas, Debt is the money which is obligated to pay before services or goods are used.

So, debt to credit ratio is one of the important factors when banks issue credit cards of certain limits to their customers.