Ad Disclosure Ad Disclosure
This question is about Credit Cards
WalletHub, Financial Company
@WalletHub
You can’t overdrafta credit card. The term “overdraft” actually applies more to bank accounts. Credit card issuers tend to use “over limit,” since you’re spending more than your credit limit. Whatever you call it, most credit cards don’t allow the practice. So if you try to exceed your credit limit, your transaction will just be declined. Andeven if your card doesn’t forbid it, you still have to opt-in to be able to spend more than your limit. This rule was put into place after the Great Recession to help curb the excessive fees that many cardholders were previously charged.
Keep in mind that if you “overdraft” a credit card, it will come with some pretty undesirable consequences. You can look forward to a fee equal to the amount by which you went over the limit. You’ll also face an increased minimum payment and likely higher interest rates on future purchases. Plus, your credit utilizationwill take a huge hit.
Here’s what you should know about credit card overdrafts:
- You’ll need to ask your issuer if they allow over-limit purchases. If they do, you can ask them to opt you in, which will allow you to exceed your credit limit. If you don’t opt-in, you can’t be charged an over-limit fee.
- Even if your issuer lets you “overdraft,” it’s still up to them whether to approve any transactions you make over your limit.
- “Overdrafting” your credit card usually will result in an over-limit fee, which legally cannot be larger than the amount by which you went over the limit.
- You can expect your minimum payment for the next month to increase by the amount you went over your limit.So if your minimum payment would normally be $25 and you went $50 over your limit,you’ll need to pay a minimum of $75 (or your full balance if it’s less than that).
- Your issuer may impose a penaltyAPR if you spend more than yourlimit.They are required by law to inform you of any APR increase 45 days in advance. After that, your rate could never go back; issuers are required to get rid of penalty APRs on late balances when a customer pays on time for 6 months, but there’s no such rule for new purchase APRs. They still have to evaluate your account every 6 months but have the power to decide whether to bring your rate back down.
- Exceeding your credit limit means your credit utilization will be over 100%.That’sbad news for your credit score.
It’s not a good idea to “overdraft” your card. If you really need to spend more than your credit limit, there are a few things you can do. First, call your issuer and ask if you’re eligible for a higher credit limit. If you’re not, you could apply for another credit card. If both of those methods fail,you might need to use a debit card instead(if you have the funds available). The fees and credit score damage involved with going over your credit card’s limit definitely aren’t worth it.
This answer was first published on 04/23/18 and it was last updated on 04/14/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
Popular Credit Cards in January 2024
-
Low Intro APR & Bonus Rewards
Chase Freedom Unlimited®
-
Everyday Cash Back
Wells Fargo Active Cash® Card
-
Building Credit
Capital One QuicksilverOne Cash Rewards Credit Card
-
0% Intro APR
Wells Fargo Reflect® Card
george_gomez, Member
@george_gomez
The only sound way you can get more than your limit is to just increase that limit. You can't really go over the limit.
Like WH says, there's "over limit" stuff, but you don't really wanna rely on that. Just get a higher limit.
This answer was first published on 05/06/18. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
sara_stiles, Member
@sara_stiles
Overdraft means going over your credit limit. Whether or not you can do that is up to you, because you can opt in or out of over limit transactions and the charges that come with them at any time. If you opt out, any transaction that would exceed your credit limit will be declined. Also, please keep in mind that most banks charge fees if you go over your credit limit.
This answer was first published on 05/17/18. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
Thank you for submitting your comment! Please login or join Wallethub for your comment to post.
Did we answer your question?
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.
WalletHub members have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines. This question was posted by WalletHub. Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not a financial institution’s responsibility to ensure all posts and questions are answered.
Ad Disclosure: Certain offers that appear on this site originate from paying advertisers, and this will be noted on an offer’s details page using the designation "Sponsored", where applicable. Advertising may impact how and where products appear on this site (including, for example, the order in which they appear). At WalletHub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.
Popular Credit Cards in January 2024
-
Low Intro APR & Bonus Rewards
Chase Freedom Unlimited®
-
Everyday Cash Back
Wells Fargo Active Cash® Card
-
Building Credit
Capital One QuicksilverOne Cash Rewards Credit Card
-
0% Intro APR
Wells Fargo Reflect® Card
Related Content
WalletHub Transparency
We are committed to being fully transparent with our readers. Opinions expressed here are the author’s and/or WalletHub editors'. WalletHub editorial content on this page is not provided, commissioned, reviewed, approved or otherwise endorsed by any company. In addition, it is not any company’s responsibility to ensure all questions are answered.
Related Categories
Credit CardsThis Week’s Top Experts
Hire the best financial advisor for your needs.Best Offers
Free Credit Data
Popular Content
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.
WalletHub members have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines. This question was posted by WalletHub. Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not a financial institution’s responsibility to ensure all posts and questions are answered.
Ad Disclosure: Certain offers that appear on this site originate from paying advertisers, and this will be noted on an offer’s details page using the designation "Sponsored", where applicable. Advertising may impact how and where products appear on this site (including, for example, the order in which they appear). At WalletHub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.
Certainly! The concept discussed in the article relates primarily to credit cards, their limits, and the potential consequences of exceeding those limits. Let's break down the key concepts used in the article:
Overdraft vs. Over Limit:
Overdraft: Traditionally associated with bank accounts, this term refers to spending more money than what's available in the account. However, in the context of credit cards, "overdraft" isn't the correct term; it's more aptly referred to as "over limit" since it pertains to spending beyond the credit limit.
Over Limit: This is when you exceed the set credit limit on your credit card. Most credit cards don't allow this, and if attempted, the transaction is typically declined. However, some issuers may permit it if the cardholder opts in, accepting associated fees and consequences.
Consequences of Exceeding Credit Limits:
- Fees: Going over the credit limit usually incurs a fee equivalent to the overspent amount.
- Increased Minimum Payment: The next month's minimum payment might rise by the overspent amount.
- Higher Interest Rates: Future purchases might incur higher interest rates.
- Credit Score Impact: Exceeding the limit leads to a credit utilization ratio above 100%, negatively impacting your credit score.
Opting In/Out:
Cardholders have the choice to opt in or out of over-limit transactions. Opting in allows spending over the credit limit, subject to issuer approval and associated fees.
Potential Remedies:
- Requesting a Higher Limit: Contacting the issuer to increase the credit limit is one way to avoid over-limit issues.
- Applying for Another Card: If a higher limit isn't feasible, applying for an additional credit card is an option.
- Using a Debit Card: If funds are available, using a debit card might be a more suitable alternative.
Legal Implications and APR:
Credit card issuers must notify customers 45 days in advance of any increase in Annual Percentage Rate (APR) due to exceeding the credit limit. There are regulations regarding penalty APRs, which may be removed after consistent on-time payments for six months.
This overview covers the essence of the article, focusing on credit card limits, over-limit transactions, their implications, and possible actions to avoid or address such situations.