What type of credit is defined by a lender placing a limit on how much a customer can borrow during a given period?

• A. Open-Ended Credit
• B. Installment Loan
• C. Service Credit
• D. Closed-End Credit

Answer: (A)

Open-ended credit is the type that provides ongoing access to funds up to a specified limit. The key feature is a revolving credit line that the borrower can draw from, repay, and borrow again within the set limit, so the lender continually enforces a maximum amount that can be borrowed during a given period. This matches the description of a lender placing a limit on how much can be borrowed. Credit cards and lines of credit are common examples.

In contrast, an installment loan is borrowed in a lump sum and repaid in fixed installments over time without reusing the same loan; service credit involves receiving goods or services with payment due later; closed-end credit is a one-time loan that isn’t replenished after payoff.