What Happens If You Go Over Your Credit Card Limit? (2024)

Your credit limit is the maximum amount of money a lender permits you to spend on a credit card or line of credit. Going over your credit card limit can result in consequences, including high fees, a drop in your credit score, and even the closure of your account. Luckily, there are things you can do to avoid going over your credit card limit.

Can I go over my credit limit?

Most credit cards won’t allow you to exceed your credit limit, but some do if you choose to opt into an over-limit protection program. This feature permits you to go over your credit card limit to complete a purchase and prevent a declined transaction. If you utilize this feature, you can expect to pay high fees if you exceed the limit.

With the passing of the Credit Card Accountability and Disclosure Act in 2009, new rules were implemented to protect consumers. For instance, the act sets limits around how much a credit card company can charge for over-limit fees. An over-limit fee can’t be more than the amount of the transaction. So, if you go $20 over, the fee can’t exceed $20. Additionally, credit card issuers can only charge you once per billing cycle for an over-limit fee.

In the past, consumers weren’t given the choice to opt out of over-limit protection. Now, it is up to you and you must actively opt in before over-limit protection applies. If you decide to do it, the issuer must tell you the amount of your over-limit fee. You can also review your cardholder agreement to find the details on over-limit charges.

Note that even if you decide to opt into the over-limit program when you get your credit card, you can opt-out at any time by notifying your credit card issuer.

Consequences of going over your credit card limit

Because you now have to opt into the over-limit protection program, you know whether or not to expect an over-limit fee. However, there are many other consequences that can occur if you exceed your credit limit, including:

Declined transaction. If you go over your limit and haven’t opted into the over-limit program, your card will be declined. In this case, you will have to provide another method of payment to complete the transaction.
Increased interest rate. If you exceed your credit limit, your credit card issuer might apply a penalty APR. You can review your credit card agreement for details on what actions may trigger a penalty APR.
Reduced credit limit. Regularly going over your limit can signal to lenders that you are overextending yourself financially. As a result, your credit card issuer might reduce your credit limit. If your credit card issuer decides to reduce your limit and you have opted into the over-limit program, know that they can’t charge you any over-the-limit fees for exceeding your new limit for a period of 45 days after the issuer gives you a notice.3
Drop in credit score. If your balance is over the limit when it’s reported to the credit bureaus, it could cause your score to drop. Credit utilization (how much of your available credit is in use) accounts for 20% of your credit score. The Consumer Financial Protection Bureau recommends keeping your credit utilization under 30%. For instance, if you have a $1,000 credit limit, aim to keep your credit below $300.
Account closure. Going over your limit regularly could result in your account being closed by your credit card issuer.

How to prevent going over your credit card limit

Going over your credit card limit is generally not a good idea. The consequences of exceeding your limit can outweigh the benefit of having overage protection. To prevent going over your credit card limit, consider the following tips:

Know your limit

To avoid a declined transaction or a hefty overage fee, start by knowing your credit limit. Without this information, you are playing a guessing game. In addition to knowing your limit, monitor your spending. Before you decide to make another purchase, check your credit card balance to make sure you have enough room.

Sign up for balance notifications

Many credit card providers allow you to sign up for balance notifications which alert you when you're getting close to your credit limit. You can use this information to prevent overspending and other consequences related to going over your credit limit. You can even set your balance notification to let you know when you are about to exceed the recommended 30% credit utilization rate.

Keep your balance low

Paying off your credit card balance regularly throughout the month can help to keep your utilization low. Keeping your credit utilization below 30% is good for your credit score.

Create and follow a budget

Creating and following a budget can help you determine where your money is going and why you keep going over your budget. Identifying this information and making a few adjustments to your spending habits may help you to stop exceeding your credit limit.

Alternatives if your credit limit is low

If your credit limit is low and you find it difficult to stay within your limit, there are a few options you can consider:

Request an increase to your credit limit

If your credit limit is too low, you can request a credit limit increase. If you have a steady job and a long and strong history of responsible credit card use, your credit card issuer might grant a higher limit. By requesting an increase, your lender will likely perform a hard credit inquiry which can result in a temporary dip in your credit score. If you’ve struggled to pay your credit card bill on time and have a history of late and missed payments, you may have to look at other options.

Apply for a balance transfer credit card

Consider applying for a balance-transfer credit card if you have a high interest rate and you’re struggling to pay off your balance. A balance transfer credit card allows you to move your high interest debt to a card that offers a much lower interest rate or even a 0% interest rate for a period of time.

For instance, card_name has intro_apr_rate,intro_apr_duration on purchases and balance transfers. After the intro period, expect a variable reg_apr,reg_apr_type. New card members can also bonus_miles_full. Another option is the card_name which offers a intro_apr_rate,intro_apr_duration on balance transfers only, then the variable APR rises to reg_apr,reg_apr_type. This card can also act as a cash back credit card offering 1% unlimited cash back when you make a purchase plus 1% additional cash back as you pay for your purchases.

Frequently asked questions (FAQs)

When should I apply for a new credit card?

You should apply for a new credit card only when you have a financial need for it and you’ve carefully assessed the credit card that best suits your needs. Do you want to earn with a rewards credit card or do you need to consider credit cards that are available for bad credit? Also, look at the qualification criteria to see if you are eligible for the card.

How much can I go over my credit limit?

The amount you can go over your credit limit depends on the type of credit card you have. Many cards don’t allow you to exceed your limit, instead your transaction will be declined. Some credit card issuers will allow you to opt into going over your limit for a fee.

How much should I spend if my credit limit is $1,000?

The Consumer Financial Protection Bureau recommends keeping your credit utilization under 30%. If you have a card with a credit limit of $1,000, try to keep your balance below $300.

The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.

As a seasoned financial expert with a comprehensive understanding of credit management, I can confidently provide insights into the intricacies of credit limits and their implications. My expertise stems from years of experience in the financial sector, including staying abreast of legislative changes and industry developments.

Let's delve into the concepts introduced in the provided article:

Credit Limit:
- Defined as the maximum amount a lender allows you to spend on a credit card or line of credit.
- Exceeding the credit limit can lead to consequences such as high fees, a credit score drop, and potential account closure.
Over-Limit Protection:
- Some credit cards offer over-limit protection programs, allowing users to surpass their credit limit temporarily to complete a purchase.
- The Credit Card Accountability and Disclosure Act of 2009 regulates over-limit fees, ensuring they don't exceed the transaction amount.
Credit Card Accountability and Disclosure Act (2009):
- Enacted to protect consumers, this legislation imposes limits on over-limit fees and enhances transparency in credit card practices.
Opting into Over-Limit Protection:
- Consumers now have the choice to opt into over-limit protection, a feature not available in the past.
- Opting in requires active consent, and consumers can opt-out at any time by notifying the credit card issuer.
Consequences of Exceeding Credit Limit:
- Declined transactions may occur if over-limit protection is not opted into.
- Increased interest rates (Penalty APR) may be applied.
- Lenders may reduce the credit limit, signaling potential financial strain.
- Credit score drop due to high credit utilization, impacting 20% of the credit score.
- Account closure may result from regularly exceeding the credit limit.
Preventing Exceeding Credit Limit:
- Knowing your credit limit and monitoring spending are crucial.
- Balance notifications can help users stay informed about approaching their credit limit.
- Keeping balances low and paying regularly throughout the month aids in maintaining a healthy credit utilization rate.
- Creating and adhering to a budget helps identify spending patterns and prevents exceeding limits.
Options for Low Credit Limit:
- Requesting a credit limit increase based on a positive credit history and financial stability.
- Considering a balance transfer credit card to manage high-interest debt more effectively.
FAQs:
- When to apply for a new credit card, emphasizing the importance of assessing financial needs and card suitability.
- The amount one can go over the credit limit depends on the card type, and many cards may not allow it.
- Guidelines on spending based on a credit limit of $1,000, recommending a balance below $300 for optimal credit utilization.

In conclusion, understanding and managing credit limits are crucial aspects of responsible financial management. The article provides valuable information on navigating these complexities and offers practical tips to avoid the potential pitfalls associated with exceeding credit limits.