A credit limit is the maximum amount you have been approved to spend on your credit card. The credit card limit is set by the credit provider, and is based on an assessment of the information in your application and your credit file.
When you make a purchase on your credit card, your available credit will decrease by the amount that you have spent. As you make repayments, this amount of credit becomes available for you to use again. For example, if you have a credit limit of $5000 and you make a $1000 purchase, your available credit will decrease to $4000. If you then make a repayment of $200, your available credit will increase to $4200.