What If I Go Over My Credit Card Limit?

Exceeding a credit card limit can trigger various consequences, from immediate transactional hurdles to longer-term impacts on your financial standing. Going over your credit limit carries implications consumers should be aware of to maintain financial health.

Immediate Repercussions of Exceeding Your Limit

When a credit card balance surpasses its limit, the most immediate effect can be transaction denial. Purchases that would push the account over its limit will likely be declined. Cardholders may also face over-limit fees, which federal regulations, such as the CARD Act, stipulate can only be charged once per billing cycle. The fee generally cannot exceed the amount by which the limit was surpassed, with typical fees ranging from $25 to $35. Exceeding the limit also contributes to a higher balance, increasing interest charges if not paid in full.

Impact on Your Credit Score

Exceeding a credit limit can affect your credit score, primarily due to an elevated credit utilization ratio. This ratio compares your current credit usage to your total available credit. Financial experts recommend keeping this ratio below 30%, as higher ratios can be detrimental. Credit utilization is a significant factor in credit score calculations. Balances, including over-limit status, are reported to credit bureaus, becoming part of your credit report and potentially causing a negative impact on your score.

Actions to Take When Over Limit

To address an over-limit situation, pay down the balance quickly. Paying the amount that exceeds the limit, or reducing the balance below it, prevents additional fees and reduces interest. Contact your credit card issuer to understand specific fees and discuss payment options. Review your recent credit card statements to identify transactions that led to exceeding the limit and verify that applied fees comply with your agreement. Understanding charges helps prevent similar situations.

Managing Over-Limit Transaction Preferences

Federal regulations mandate that credit card issuers must obtain explicit consent from the cardholder to allow transactions that would push the account over its limit. Without this “opt-in,” transactions attempting to go over the limit should be declined, avoiding an over-limit fee. If a cardholder opts in, over-limit transactions may be approved, but this can lead to fees. If a cardholder opts out, any transaction attempting to go over the limit will likely be declined. Cardholders can change their over-limit preference at any time, typically through their online account or by contacting customer service.