How Much Can I Go Over My Credit Card Limit?
Uncover the realities of credit card limits. Understand the discretion involved and the broader implications of exceeding your spending capacity.
A credit card limit is the maximum amount a card issuer allows an individual to borrow on a specific card. This limit is set when the card is issued, based on factors like creditworthiness, income, and payment history. It defines the boundary of available credit. Operating within this limit is an expectation for responsible credit management.
Credit Card Over-Limit Policy
The ability to exceed a credit card limit is governed by specific regulations, primarily stemming from the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. This federal law requires cardholders to “opt in” to allow transactions that would push their balance over the credit limit. Without this explicit consent, any transaction attempting to exceed the limit will be declined.
Even if a cardholder opts in, the credit card issuer retains the discretion to approve or decline over-limit transactions. Opting in enables the possibility of approval, but does not guarantee it. There is no universal fixed amount by which a cardholder can go over their limit. Any potential over-limit allowance is entirely at the issuer’s discretion, depending on their internal policies, the cardholder’s payment history, and the specifics of the transaction.
Understanding Over-Limit Charges
If a credit card transaction is approved and causes the account balance to exceed its credit limit after the cardholder has opted in, an over-limit fee can be assessed. The Credit CARD Act of 2009 implemented caps on these fees.
The first over-limit fee can be up to $25, and a subsequent fee within six months can be up to $35. The fee amount cannot exceed the amount by which the credit limit was surpassed. For instance, if an account goes over the limit by $10, the fee cannot be more than $10. These fees are charged per instance but may be capped per billing cycle.
Impact on Your Financial Standing
Consistently exceeding or attempting to exceed a credit limit can have broader consequences beyond direct fees, impacting an individual’s financial standing. Credit utilization, which is the percentage of available credit being used, is a factor. High credit utilization, especially above 30%, is generally viewed negatively by lenders and can lead to a decrease in credit scores, even if payments are made on time.
Regularly going over the credit limit, even if approved, signals increased risk to credit card issuers. This behavior can result in several negative outcomes, including a reduction in the credit limit, an increase in the annual percentage rate (APR), or even account closure. An increased APR can significantly raise the cost of carrying a balance. A closed credit card account can negatively affect credit scores.