Going Over Your Credit Limit: What You Need to Know
10 MIN READ
Published July 24, 2023 | Updated December 16, 2023
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. But 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.
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. 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 will be subject to a fee. If you opt out, any transaction over your limit will be declined. Even after opting in, the credit card company may deny the transaction. Typically, this is hidden in your contact that you sign when applying for a credit card.
What 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’ve opted in for overdraft services. You may have to pay a fee on transactions over your credit limit. Over-limit fees typically do not exceed $38. 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, your transaction will 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, increase your minimum payments, or cancel your card.
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.
It is recommended that you should keep your credit utilization under 30% to keep your credit report in good standing. This means that if you have a credit card with a $1,000 limit, your outstanding balance should be 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.
How to Avoid Going Over Your Credit Limit
Now that you know what happens if you go over your credit limit, it is 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.
“Make sure to manage your credit card accounts online and set aside time once a week to log in and review your accounts," Teresa Dodson, debt relief expert and founder of Greenbacks Consulting, advises. "Most people go over the limit because they aren’t tracking their spending in real-time, and it gets away from them.”
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. 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.
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:
- If you have a stable job and good credit scores, you can request a credit limit increase.
- Consider getting a new credit card. Compare the best credit cards with no annual fees and competitive interest rates if you’re eligible.
- 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, ask the company to reconsider.
- If you have maxed out credit cards, bad credit, or missed payments, consider other alternatives, such as using any other credit cards you may have.
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.
4. Apply for a Balance Transfer Credit Card
If you are 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 are not eligible for a balance transfer credit card or increased limit, get in touch with 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 on repaying 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 pay 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.
Final Thoughts on What Happens After Going Over Your Credit 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 limit.
If you are 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.