Can You Go Over Your Credit Card Limit? Yes, and Here’s What Happens
Your credit card agreement includes a credit limit, which is the maximum amount of debt that you can have outstanding on the card at any time. The limit is set when you apply for the card and is determined by several factors, including your income, credit history and current level of debt.
If you try to charge something to your card once you’ve reached your limit, the charge could be declined. This can be frustrating and potentially embarrassing, depending where you are (and whom you’re with) when it happens.
However, exceeding your credit limit does not always result in the next charge to the card being declined. Let’s take a look at the situation and likely consequences.
How you might be able to exceed your credit card’s limit
Many cards offer an over-the-limit program. These programs allow you to keep making purchases with a maxed card, but they also allow the issuer to charge you a fee for doing so. The Credit CARD Act of 2009 requires the credit card issuer to have your consent to charge these fees, so you will need to opt in if you’re interested. The issuer can only charge the fee once per billing cycle, but the fee could increase with the next cycle if you continue to exceed your limit.
Why you don’t want to exceed your credit limit
Even if the card issuer approves transactions that exceed your credit limit, you could still suffer some negative consequences.
- Exceeding your credit limit, especially on a regular basis, can lower your credit score. This can have a negative effect on your finances beyond any one credit card.
- If you are continually over your credit limit, the card issuer might lower your credit line or increase your rate. The issuer may feel that you are a risk for repayment and doesn’t want to be stuck with a potential write-off.
- Your issuer may close your account.
Overall, exceeding your credit limit can be a sign that you are not managing your finances well. Consider re-evaluating your budget or seeking help from a financial professional.
How to avoid exceeding your credit limit
The best thing you can do to avoid going over your credit limit is to monitor your balance and plan accordingly. Beyond this, there are some steps you can take to avoid the situation:
- Consider skipping over-the-limit protection. On one hand, this leaves you unprotected from exceeding your limit. But knowing you don’t have that safety net might be the push you need to more effectively manage your spending.
- Pay your credit card bill as early as possible. If you are not able to pay the bill in full each month, paying earlier could help reduce your balance by avoiding some of the interest charges. And reducing your balance can provide extra wiggle room on your card in case of emergency.
- Set up mobile phone alerts to notify you when you are nearing your credit limit. The process varies from card to card, but most issuers now offer this feature.
What to do if you go over the limit
If you’ve exceeded your credit card limit and the charge has been accepted by the issuer, you have a few options:
- If you can, immediately make a payment for at least enough to get your balance back under your credit limit.
- Review the charge that put you over the limit to ensure that it was legitimate and for a purchase that you actually made. If it isn’t, call the credit card company immediately to dispute the charge.
- Ask your credit card company to increase your credit limit. The issuer’s decision will be based on a number of factors, including your payment history. You may have to provide information similar to when you initially applied for the card, and the issuer may run a new credit check.
If paying off the balance is not a hardship and you simply need a higher credit limit for convenience, asking for a higher limit can make sense. Let’s say you travel for business and charge everything to the card, but pay it off each month once you’ve been reimbursed. Then it could make sense to increase your limit. But if you’re constantly hitting your limit because you have trouble resisting impulse purchases or spontaneous vacations, asking for more credit can be dangerous. Instead, try to make other changes that can help you get control of your spending.
Your best option is to never exceed the spending limit on your credit card in the first place. But if you cannot avoid it, be sure you know your options beforehand and take any appropriate action you can to avoid letting it damage your credit score. If you have already done some damage to your score, you might consider contacting a credit repair agency.