What Happens if You Go Over Your Credit Card Limit?

Introduction

From the amount of money you can withdraw at an ATM to how much food you can consume at an all-you-can-eat sushi bar, many things in life have a limit. And credit cards are no different.

A credit limit, or credit line, is the maximum amount of credit an issuer extends to a cardmember. Issuers may use multiple criteria to determine your credit limit, including your credit score, income, credit history, and payment history.

It’s important to understand how your credit card limit works because it tells you how much room you have — or don’t have — to spend with your card. And staying within that limit has a direct line to your overall financial health.

Can You Go Over Your Credit Card Limit?

Depending on the credit card company, you may be able to go over your credit card limit. But it’s not always a guarantee.

If your account is in good standing, some issuers may allow you to exceed your limit fee-free. On the other hand, others may allow you to exceed your limit, but for an over-limit fee. It’s important to note that the CARD Act of 2009 states issuers cannot charge an over-limit fee unless the cardholder opts in to allow it. The CARD Act also regulates how much and how often an issuer can charge an over-limit fee.

The real question isn’t so much whether you can go over your credit limit, but what happens if you do.

What Happens if You Go Over Your Credit Card Limit?

There’s an old saying, “Just because you can doesn’t mean you should.”

Just because you can touch a hot iron doesn’t mean you should.

Just because you can order Thai food with a 10-out-of-10 spice level doesn’t mean you should.

And — bringing it back to the topic at hand — just because you can go over your credit card limit doesn’t mean you should. Why? Because there are potential consequences for doing so, in addition to the previously mentioned fees.

• Declined purchase – If you haven’t opted in for an over-limit fee, your transaction will likely be declined.
• Decreased credit score – Experts recommend keeping your credit utilization ratio (CUR) below 30%, but the lower the better. By going over your credit limit, your CUR on just that card is over 100%, which could harm your credit in the process.
• Increased interest rate – Your issuer may apply a penalty APR to your account that’s higher than your regular rate.
• Frozen account – Your issuer can freeze your account, keeping you from making additional transactions until you make a payment that puts you back below the limit.

How Much Can You Go Over Your Credit Card Limit?

Whether you’ve opted in for an over-limit fee or not, how much you’ll be allowed to spend in excess of your limit varies from person to person. Credit issuers may weigh several factors to determine the amount, including your payment history. It’s really up to them.

Read your cardmember agreement or contact your credit issuer’s customer service for more information.

How To Prevent Going Over Your Credit Card Limit

This may seem obvious, but one way to prevent going over your credit limit is to always know where it and your balance stand. A great way to do this is to log in to your online account or mobile app, if available. There’s no sense in playing the guessing game when you have the technology available at your fingertips to know the answer within seconds.

Speaking of technology, another way to prevent going over your limit is to set up account alerts to notify you when your balance reaches a specified amount, when a payment is due, or when a charge over a certain amount is made on your card.

And last, but certainly not least, practice healthy financial habits. By following a budget and always making timely payments, you’re not only working toward a strong credit score but also managing your balance appropriately.

Alternative Solutions for a Low Credit Limit

If you’re having difficulty staying under your credit limit — or perhaps want more room to spend — you’ve got options.

You can contact your credit issuer and request a credit line increase. If you’ve used your card responsibly and have regularly made timely payments, your issuer may be amenable. Just be aware that this process may include a hard inquiry, which could drop your credit score a few points.

Another option is to apply for a new credit card. Adding another card to your wallet can raise your total credit limit, giving you extra spending power when needed. Just remember that applying for a new card almost always generates a hard pull. Plus, another card means one more account to keep up with and use responsibly.

Bottom Line

How much (or how little) credit you have is how much spending power you’ve got at any given time.

And going over your limit can bring some pretty substantial consequences with it. So, knowing your limit at all times — and always keeping your balance below it — is of the utmost importance.

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