What Fee Will You Pay If You Go Over Your Credit Limit?

Credit cards offer a revolving line of credit up to a specified maximum, known as your credit limit. Exceeding this limit can result in specific financial charges.

The Over-the-Limit Fee Amount

An over-the-limit fee is a direct charge assessed by a credit card issuer when a cardholder’s outstanding balance surpasses their assigned credit limit. Federal regulations, stemming from the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, cap the maximum amount credit card issuers can levy for these fees.

The fee for a first occurrence is capped at $29, while subsequent offenses within a six-month period can incur a fee up to $40, subject to inflation adjustments. The fee cannot exceed the actual amount by which the credit limit was surpassed. For example, if a cardholder goes over their limit by $20, the fee cannot be more than $20.

How Over-the-Limit Fees Are Applied

The application of over-the-limit fees is subject to specific conditions established by the CARD Act. Credit card issuers must obtain explicit consent from consumers, known as an “opt-in,” to approve transactions that would cause the account balance to exceed the credit limit. Without this consent, transactions that would push the account over its limit are generally declined, and no fee is charged.

If a cardholder has opted in, various transactions can trigger an over-the-limit fee, including new purchases, balance transfers, or cash advances. The fee is typically charged once per billing cycle, even if the credit limit is exceeded multiple times within that cycle. Card issuers cannot impose an over-the-limit fee solely because of interest or fees charged to the account during the billing cycle.

Preventing Over-the-Limit Fees

Regularly monitoring the credit card balance through online portals or mobile applications helps track spending in real-time, and setting up balance alerts or spending notifications provides timely warnings when the account approaches its limit. These alerts allow for proactive adjustments to spending habits.

Understanding the opt-in/opt-out choice for over-the-limit transactions is an important preventative measure. Choosing to opt-out ensures that transactions exceeding the limit will be declined, preventing the fee.

Requesting a credit limit increase from the card issuer can provide more financial flexibility if spending consistently nears the current limit. Making timely and sufficient payments is beneficial, as it reduces the outstanding balance and frees up available credit.

Additional Costs of Exceeding Your Limit

Beyond the specific over-the-limit fee, exceeding a credit limit can lead to other direct financial consequences. One significant impact is the potential activation of a penalty Annual Percentage Rate (APR). A penalty APR is a substantially higher interest rate applied to the outstanding balance, triggered by violations of the cardholder agreement, such as going over the credit limit.

This increased interest rate can apply to both new purchases and existing balances, depending on the card issuer’s terms. The over-limit amount itself will also accrue interest charges at the standard or penalty APR, further increasing the total debt. While a penalty APR may not be permanent, it significantly raises the cost of carrying a balance until the account is managed responsibly again.