If you’re in need of quick access to funds but have maxed out credit cards, you may have thought about going over your credit card limit. A credit limit is the maximum amount of money that the lender will allow you to spend on your credit card or line of credit. However, before you do, know that there are consequences. Read on to learn more about the things you can do to avoid going over your credit limit and what you can do if you’re short on funds.  

What Really Happens if You Go Over Your Credit Limit?

While you may consider using your credit card for short-term relief, what happens if you go over your credit limit? Overspending can lead to long-term problems such as mounting credit card debt. Here are some of the most common consequences of spending over your credit limit. 

Fees and Penalties

If you have applied for a credit card and the credit card company gave you approval, it means you’ve agreed to their terms and conditions. This also means you very likely have opted in for credit line over-limit services. 

This means that you have opted in to have the credit card company approve certain charges to your account that may push your balance over your pre-established credit limit. You may have to pay a service fee on transactions over your credit limit. Over-limit fees typically do not exceed $38 per instance. 

In many instances, credit card companies do not charge this fee at all. Check your cardholder agreement to learn more about the fees. These fees can only be charged with your consent due to the Credit CARD Act of 2009. You may also be able to opt out of this option if you want to avoid these fees. If you opt-out, these transactions that would put your balance over your credit limit will simply be declined.

While you may not have to pay over-limit fees, there may be other penalties. Credit card issuers may reduce your credit limit, increase your interest rate (aka, your APR) on purchases and cash advances, increase your minimum payments, or even cancel your card and close your account to any further purchases if you are a repeat offender.

Impact on Credit Score

Exceeding your credit limit may affect your credit score. Your credit utilization rate is a major factor that impacts your credit score. When you spend over your credit limit, it bumps up your credit utilization ratio and is likely to impact your credit score.

We recommend that you keep your credit utilization under 30% to keep it from negatively impacting your credit scores. This means that if you have a credit card with a $1,000 limit, your outstanding balance should ideally be kept lower than $300 at all times. If your score has been impacted by high utilization, it can be a smart idea to search for help from one of the best credit repair companies.    

Can You Go Over Your Credit Limit?

Most cards won’t let you exceed the limit unless you have opted in for a program that allows you to do so. You can spend more than your credit card limit if you’ve opted in, but there’s no way to know how much more you can spend over your limit. Credit card issuers consider several factors, such as your payment history, when approving over-the-limit transactions.

All transactions above the credit limit are subject to over-limit fees, but credit card companies can only charge this fee with your consent. This means that if you opt-in and provide consent, you may be able to spend beyond your limit, but it may be subject to a fee. If you opt-out, any transaction over your limit will be declined. However, the credit card company may deny the transaction even after opting in. Typically, this is hidden in the contract that you sign when applying for a credit card. 

“If you have very good to excellent credit, and you maintain a Visa Signature or World Mastercard account with your credit card issuer (i.e. your bank, credit union, or other financial institution), you will typically be approved for transactions that go over your credit limit because these top-tier cards are branded as offering “no pre-set spending limit” to their cardholders.  With these cards, in particular, individual transactions are approved based on factors other than the initial credit limit set when the account was approved.  For decades, American Express has offered the same thing on its traditional green, gold, and platinum charge cards.  Most other credit cards, however, will not allow their cardholders to exceed their established credit limit.”  –Brad Reichert

How To Avoid Going Over Your Credit Limit

Now that you know what happens if you go over your credit limit, it’s easier to understand why it is best to avoid this situation in the first place. Here are a few tips and strategies to help you avoid exceeding your credit limit:

Monitor Your Spending

Similar to avoiding a negative bank account balance, the best way to avoid exceeding your spending limit is by keeping track of your spending. Know what your current credit limit is. You can easily find this by checking your credit card bill statement online or through your card’s mobile app.

You can also get in touch with your credit card issuer to ask them about your credit limit if you’re not sure. Credit card companies may raise or lower your limits, so it is important to check regularly. 

Increase Your Credit Limit  

If you find yourself in a situation where you really need access to more credit, contact your credit card company to ask for a credit limit increase. You can do this by calling the company’s customer service or by making an online request.

 Before contacting the lender, be sure to check your credit score and history. Credit card companies are more likely to approve your request if you have a good credit score and a positive history of on-time payments with them. If your credit scores are low, you may have to work on credit repair first before you get in touch with the credit card company. Ensure your details, such as current income, are updated because it may make you eligible for a higher credit limit.

Steps To Take if You Go Over Your Credit Limit

If you’ve already exceeded your credit limit, there are still several ways to manage your credit card debt and minimize the damage.

1. Determine the Damage

Assess the damage to determine your next steps. Check your credit card statement to see how much you currently owe on your credit card and any fees that may have been added to your statement. You should also review your credit score to see if it has been affected. 

2. Pay Off Your Outstanding Balances as Quickly as Possible

Pay off as much of your outstanding balance as you can so you can have more breathing room. Eliminating or reducing your unsecured debt will also improve your credit utilization ratio. This may improve your credit score. 

3. Ask For a Credit Limit Increase

Another way to get more breathing room to manage your situation is by asking for a credit limit increase. If your credit card account is in good standing and you have a good credit history, your request may be accepted. If approved, be careful not to spend the maximum amount on your card again because it will only make your situation worse.  Remember, your credit card issuer can always adjust your credit limit lower again if they feel you are using too much of your credit limit too often.

4. Apply for a Balance Transfer Credit Card

If you’re finding it challenging to pay off the balances on your credit cards and have a good credit score, balance transfer cards can help. Credit card debt consolidation through a balance transfer card can help you streamline your payments. These cards often have 0% APR introductory offers, so you may also be able to save a considerable amount of money in interest charges if you manage to pay off your balance within that introductory period.

5. Negotiate With the Credit Card Company

If you’re not eligible for a balance transfer credit card or increased limit, contact your card issuer to negotiate your credit card debt. Some issuers may be willing to waive penalties and fees if you are upfront about your situation and have a plan to repay the amount you owe on your cards. 

6. Create a Repayment Plan

Once you know exactly how much you have spent on your credit cards, come up with a plan to pay off your credit card debt. Consider getting an additional part-time job or a side gig that will allow you to earn a little extra money to help pay down your debt. 

You can also check with your employer to see if you can get overtime hours to bump up your earnings. Review your budget to find areas where you can cut your expenses to free up some money that you can use towards your credit card payments. Pay a little extra every billing cycle to reduce your credit card balance faster. 

Alternatives if Your Credit Limit is Low

If your credit limit was recently reduced or if you have a low credit limit, there are still several other alternatives to try to avoid going over the limit. Here are a few suggestions to try: 

  • Request a credit limit increase: If you have a stable job and good credit scores, you can request a credit limit increase, especially if your income has gone up recently.
  • Get a new credit card: Compare the best credit cards with no annual fees and competitive interest rates if you’re eligible.
  • Contact your credit card issuer: If your credit limit was reduced, get in touch with the card issuer and ask why your limit was cut. If your account is still in good standing and you have a reliable source of income, you can always ask the company to reconsider.
  • Use another credit card: If you have maxed out one of your credit cards, you have bad credit, or you have missed payments, consider other alternatives, such as using any other credit cards or lines of credit you may have, until you can sort out your income and spending situation and get back on track. 

Avoid Going Over Your Credit Card Limit

Exceeding your credit limit is almost never a good choice. Your transaction may be declined in most cases, and if it does go through, there may be over-the-limit fees. Knowing what happens if you go over your credit limit is important. Check your credit card statements regularly to avoid purchases that may exceed your available credit limit.

If you’re close to maxing out your credit cards and are worried about whether your next transaction may go through, it may be time for you to start thinking about a credit card debt relief program.

Get in touch with TurboDebt to determine the best strategy to pay off your credit card debt. Our team will offer you a personalized debt relief option based on your individual needs. Get in touch with us for a free consultation today.