It’s the stuff of nightmares: You’re footing the bill for an important dinner, only to be quietly told by the server that your card has been declined. That's one possible outcome of attempting to charge above your card’s credit limit.
Credit card issuers determine your credit limit when you apply for a card, basing their decision on your personal financial information including income, other debts and payment history.
Sometimes, though, an extra-expensive month or unanticipated major purchase means you risk going over your credit limit. (Having a low credit limit to begin with also puts you at risk of exceeding it.)
But depending on the terms of your card, you may be able to charge above your credit limit — although by just how much is unclear. And even if the charge goes through, you may face other consequences.
Here's what happens when you go over your credit card's credit limit.
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A credit limit is the amount you can charge to your credit card during any given billing cycle. With most cards, once you pay your credit card bill — even if you make a payment that’s lower than the total due — you can charge up to the credit limit again during the next billing cycle. Over time, the card issuer may adjust that limit if there are changes to your income level or spending. You may also be eligible for a credit limit increase just by requesting one. A declined charge or (rarely) a fee
If you attempt to charge beyond your credit limit, it's possible your credit card will be declined at the point of purchase, which can make for an embarrassing moment. But that's not always the outcome.
Some credit card issuers will allow you to go over your credit limit at their discretion or if you opt in to the ability to do so. However, the amount that you're approved to go over isn't predictable, and this isn’t an open invitation to keep adding charges to your account. The issuer may put other limits on your account until you make a payment. (See below.)
The Credit Card Act of 2009 put rules in place to curb the fees that issuers can charge for going over your credit limit, and these fees have become rare. A NerdWallet investigation in 2017 found that major issuers had all but eliminated over-limit fees, and the Consumer Financial Protection Bureau referred to them as "essentially extinct." In any case, card issuers can’t approve an over-the-limit purchase — and charge a fee for it — unless the cardholder opts in to allow it.
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A higher minimum payment or more immediate due date
Even if an issuer allows you to exceed your credit limit, the company may increase the minimum payment due by the amount you charged above your credit limit. This means the over-limit charges must be paid at the end of that billing cycle, and you can’t carry that as part of your credit card balance.
You might also be on the hook to immediately repay the excess amount (or even the total balance due), without the ability to wait until the bill arrives as usual.
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Note that charge cards work differently from traditional credit cards. A charge card has no set spending limit, so there's generally no credit ceiling to "exceed." However, unlike with credit cards, a charge card requires you to pay your bill in full each month. You typically can't carry a balance. A pause on more charges
Some issuers will stop you from putting additional charges on your card until you make a payment that puts your account back below its limit. This can also include other transactions like cash advances or balance transfers.
Changes to your card’s terms
Issuers reserve the right to change some of your card’s terms at any time, including the credit limit and interest rate. They may also close your account.
A decrease in your credit scores
One factor that’s part of calculating your credit scores is your credit utilization ratio, which is the amount of your total credit limit that you charge. In general, we recommend charging no more than 30% of your limit (and less is even better). Exceeding your credit limit or maintaining high balances can lower your credit scores over time.
An issuer opting to close your account can also affect your scores because losing an account can lower the average age of your accounts and decrease your overall credit limit, making it that much easier to max out other credit cards later.
» MORE: Why did my credit score drop?
Ways to avoid going over your credit limit
- Set up alerts: Adjust your account preferences on the issuer’s website or app so you’ll receive a text or email when your card balance reaches a certain amount. You can also get alerts when your payment deadline is close or when a charge over a certain amount is made on your card.
- Make small payments throughout the month: You don’t have to wait until the due date to make one big payment. Making multiple smaller payments throughout the month can help you maintain a smaller balance and lower the risk of going over the limit.
- Ask for a credit limit increase: A low credit limit may not match what you need from your credit card. You can call the number on the back of your card to see whether you’d be eligible for a credit limit increase.
- Open another credit card: If your current issuer declined your limit increase request, applying for an additional credit card may be the solution. It’ll raise your total credit limit and give you another card to fall back on for unexpected expenses. Just be extra careful because managing multiple credit cards can get more complicated.
