Do Credit Cards Allow You To Go Over The Limit?

Going over your credit card limit can be a stressful experience. As a credit card holder you may wonder – can I exceed my credit limit and what happens if I do? In this comprehensive guide, we’ll explain everything you need to know about credit limits, overlimit fees, and alternatives if you need more spending flexibility.

What Is A Credit Limit?

Your credit limit is the maximum amount your card issuer allows you to charge on your account. It’s based on factors like your credit score, income, and credit history when you apply for the card. Credit limits often start around $500 for new cardholders and can go up into the tens of thousands for those with excellent credit.

The limit helps issuers manage risk – it prevents cardholders from charging more than they can reliably pay back. As a cardholder, staying below your limit is wise to avoid fees and credit score damage

Can You Go Over Your Credit Limit?

Technically, yes – you can exceed your credit card limit with certain issuers. However, it’s not guaranteed you’ll be able to make purchases over the limit. Here’s how it works:

• Most issuers require you to opt-in to allow overlimit transactions. This means you agree to pay fees if you go over the limit.

• If you don’t opt-in, any transaction that exceeds your limit will be automatically declined.

• If you do choose to opt in, there’s no guarantee that a transaction over your limit will go through. The issuer may still decline it based on risk factors.

• Any approved overlimit transactions will incur a penalty fee, typically $35 or less.

Essentially going over your limit is possible but not encouraged. Issuers have full discretion to approve or deny overlimit charges.

Consequences Of Exceeding Your Credit Limit

While exceeding your limit may provide temporary relief, it can cause lasting financial issues:

• Fees: The more you spend than your limit, the more you’ll be charged for each billing cycle. This directly increases the debt you owe.

• Interest charges: Purchase and cash advance APRs apply to any balance over your limit, increasing your total interest costs.

• Your credit score can drop by up to 100 points if you max out your cards and go over your limits. It hurts your credit utilization and payment history.

• Account closure: Issuers may close your account if you regularly go over your limit and can’t pay off the balances. This can also hurt your credit score.

Clearly, avoiding your credit limit is wise from both a financial and credit health perspective.

What Should You Do If You Go Over Your Limit?

If you do exceed your credit limit, here are some tips:

• Pay it down ASAP: Pay down as much of the overlimit balance as you can afford when your bill comes. This will minimize interest and fees.

• Lower your utilization: Get your balance below the limit to prevent further fees and credit score damage. Aim for less than 30% of your limit.

• Call your issuer: Ask them to waive the overlimit fee as a courtesy if it’s your first time going over. But don’t make a habit of this.

• Review expenses: Analyze what caused you to exceed your limit and make any needed spending adjustments.

• Consider balance transfers: Transferring high-rate balances to a 0% APR card can provide relief from interest costs as you pay down debt.

The quicker you get back under your limit, the less financial impact you’ll experience.

Alternatives If Your Limit Is Too Low

If your credit limit causes you to consistently bump up against (or exceed) your limit, here are some options:

• Request a CLI: Ask your issuer for a credit limit increase if you have a good payment history. This will provide more spending room.

• Open a new card: Applying for an additional card means a new credit limit and more flexibility. First check your credit score to target the right cards.

• Use other payment methods: Rely on debit, cash, or checking account payments for purchases that would push you over your limit.

• Upgrade your card: See if you qualify for a premium version of your current card, which often comes with a higher limit.

The key is finding a credit limit that fits your spending needs without enabling you to overspend. A limit increase or new card can help as long as you continue using credit responsibly.

How To Avoid Exceeding Your Limit

Here are some tips to stay within your credit limit:

• Monitor your balance frequently to know how much room you have left

• Set up account alerts to be notified when you’re approaching your limit

• Pay more than the minimum payment to keep balances low

• Ask for a higher limit once you’ve built some positive history with your card

• Don’t charge expenses right up to your limit in case of unexpected costs

• Put everyday purchases on debit/cash instead of credit cards

• Avoid large impulse purchase that could instantly max out your balance

• Maintain a low credit utilization of 30% or less at all times

Staying well below your limit at all times gives you financial breathing room. It also keeps your credit utilization low, which is key for your credit scores.

The Bottom Line

While technically possible in some cases, exceeding your credit limit comes with financial risks you’re better off avoiding. The fees, interest charges, credit score damage, and risk of account closure simply aren’t worth it.

Fortunately, there are plenty of alternatives, from requesting a higher limit to opening a new card or relying on debit/cash for purchases instead. With proactive credit management, you can ensure your limit provides the flexibility you need without the temptation to overspend. Monitoring your balance, minimizing your utilization, and using your credit wisely will go a long way.