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What Happens If You Go Over Your Credit Limit?

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Exceeding the limit on your credit card and getting charged for it has been a rare occurrence since federal regulations curbed over-limit fees. But there are other consequences for going over your credit limit, such as a denied transaction or a ding to your credit score if the purchase is allowed. It’s important to weigh these factors and consider ways to avoid crossing your card’s credit limit.

Why It’s Harder Now to Go Over Your Credit Limit

Thanks to the Credit CARD Act of 2009, it’s harder to be charged for going over your credit limit. The law stipulates that you must first opt in to over-limit protection and any subsequent fees before your issuer can charge for exceeding the limit. If you don’t opt in, the issuer can then decline the transaction that put you over your limit. The law also prohibits issuers from charging more than one over-limit fee per billing cycle and only once more in the next two billing cycles. You can opt out of over-limit protection at any time, according to the law.

Before the Credit CARD Act, credit card companies routinely approved transactions that exceeded the limit and then dinged customers with an over-limit fee, typically between $25 and $35. The law has effectively eliminated over-limit fees, according to a 2015 report from the Consumer Financial Protection Bureau, saving American consumers $9 billion in fees from 2011 to 2014.

What Happens If You Go Over Your Credit Card Limit?

If you haven’t opted in for over-limit protection and go over your credit limit, what happens depends on the issuer. A Bank of America customer service representative told us that a transaction that exceeds the credit limit would be denied. Other banks—such as American Express, Wells Fargo, Discover, Capital One, Citibank, Chase and U.S. Bank—have more flexible over-limit policies. Depending on the cardholder, they may approve an over-limit purchase and require you to promptly pay the amount over the limit, but without charging a fee. For select cardholders, Chase offers a credit access line that allows for over-limit charges, approved on a case-by-case basis by Chase. The amount of your credit access line is posted on your monthly billing statement and can be canceled, changed or restricted at any times. It’s best to call your issuer to find out the policy that affects your specific account.

If you have opted in to over-limit protection, some issuers may charge an over-limit fee if they have any. If you habitually exceed your limit, an issuer may decrease your limit or eventually close your account. Exceeding your credit limit also hurts your credit score. Your utilization rate, or the amount of available credit you use, is an important factor in calculating your FICO credit score. The higher that percentage, the worse for your credit score. So if you exceed the limit on your card, you are using more than 100% of your available credit, putting a dent in your score, even if you have zero balances on your other cards.

You may want to consider over-limit protection for business purposes. If you often treat clients to lunch or dinner at expensive restaurants, you may want to avoid the embarrassment of having your credit card declined when paying for the meal. But make sure you have the money necessary to pay back the over-limit quickly. Also, make sure to avoid consistently going over the limit, even in these business cases, because the issuer may decrease your limit or close your account.

How To Avoid Going Over the Credit Limit

Whether or not you’ve opted into over-limit protection, it’s better to avoid transactions that exceed your limit. Consider the alternatives. Many restaurants and stores allow transactions to be split among several cards if the transaction amount is too much for one credit card to accommodate. Many issuers also offer mobile alerts that ping you when you use a high percentage of your credit limit. That can help you keep tabs on your spending and keep you from accidentally overcharging your credit card.

Charge cards: If you need a flexible credit limit, you may want to consider a charge card. Similar to a credit card, charge cards allow you to make charges that you pay at a later point. But charge cards don’t have preset credit limits, so you can, say, charge $100 one month and $1,000 the next. The catch? You must pay back the entire amount you charged each month by the due date. If you don’t, the issuer can charge heavy fees or even close your account. Charge cards typically come with an annual fee that can range from $95 to $450.

Increase your limit: If you find yourself getting close to exceeding your credit limit on a regular basis, you may want to request a limit increase. You generally can do this by submitting an online request after logging into your account or by calling your issuer using the phone number on your card. Have a specific increase in mind and a good reason for the request, such as an upcoming large purchase.

You may need to provide your annual income (including personal, shared and optional income), employment status, monthly mortgage or rent payment; and the average amount you spend each month on your credit cards. If the increase request is sizeable, your issuer may even pull your credit report or ask for additional documentation. Approval may take longer, too, for larger requests.

Your chances of approval is higher if your account has been opened for a while, your payment history is positive, your credit score is high, and your income has increased. If your increase request is denied, don’t despair. Issuers routinely increase limits 15% to 20% on accounts with good payment history 12 to 18 months after an account is opened. They also review your account automatically every year and may up your limit modestly then. To read more about increasing your credit limit, check out our guide here.

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