Guide / Asset-backed credit
The difference between holding value and borrowing it.
An asset, a credit limit and a cash balance can all be expressed in money. They do different jobs. Here is how to read them before using asset-backed credit.
four values
Four values that should stay separate.
A larger combined number can hide the obligation. Read the components instead.
| Value | Meaning |
|---|---|
| Cash balance | Money held in an account, subject to availability and account terms. |
| Pledged assets | Holdings committed as security for borrowing. |
| Available credit | The part of an agreed facility available to draw. |
| Outstanding debt | Borrowing already used and still to be repaid. |
credit in use
Spending changes the borrowing position.
A card purchase using the facility reduces available credit and increases the amount owed. Repayment reduces the debt; fees and interest are governed by the credit agreement.
collateral changes
The asset position can change too.
The agreement explains how collateral is valued and what coverage is required.
- Value changes
A fall in collateral value can affect the credit position even if spending has not changed.
- Coverage requirements
The agreement sets what must happen if required coverage is no longer met.
- Security enforcement
Pledged assets may be sold if the agreement’s requirements are not met.
Before you decide.
Do I sell the assets to use the card?
Eligible assets are pledged as collateral for credit. A purchase draws on that credit rather than requiring an upfront asset sale. You still owe what you borrow, and collateral can be sold if the agreement’s requirements are not met.
Which assets can I use?
Collateral eligibility and valuation depend on the offer. Ask for the accepted asset list, how values are assessed and the conditions for adding or releasing collateral before committing.
How much does borrowing cost?
Your offer sets the interest, fees and repayment requirements. Compare the total borrowing cost and card charges with the cashback you expect from eligible spending.