What Will the Card Issuer Do If I Go Over My Credit Limit?

The negative consequences of exceeding your credit limit include fees and a lower credit score.

When a credit card issuer approves your application for a credit card, you are given a fixed credit limit that you can use for purchases and balance transfers. The issuer has assigned you this limit based on your credit score, credit history and other financial factors. It is the responsibility of the consumer to manage this credit line. If the line is exceeded or "maxxed out," there are consequences.

Over-the-Limit Fees

If you read your credit card agreement, it is clearly written that your card issuer will assess you over-the-limit fees. Regardless of how much you are over your limit, these fees typically range from $25 to $35, but can be higher. These fees can hit you immediately once you exceed your limit or can post at the end of the month. The issuer may also charge multiple fees for each approved transaction that takes place beyond your assigned credit line.

Account on Hold

If your credit card is maxxed out, the issuer may put a hold on your account and suspend your charging privileges. This is a natural response, since you have exceeded your borrowing capacity, but it can catch you by surprise. You can find yourself in line at the grocery store with a transaction declined, or if you have your account set to automatically charge your card each month, your Internet service may be shut off for nonpayment. You may receive a notification in the mail, but it is often a few business days after the limit has been exceeded.

Reported to Credit Bureaus

Once you are over the limit, you will be automatically reported to the credit bureaus by your card issuer. If you are beyond your credit limit, your credit score is probably already suffering from a too high debt-utilization ratio. Unfortunately, being over the limit reflects even more poorly on your credit report and credit score, and this information will be shared.

Account Closed

Credit card issuers will rarely close accounts, but exceeding your limit is usually a violation of the terms and conditions of your credit card account. Additionally, issuers periodically monitor their portfolio for risk, and a customer over the limit carries a higher risk of default. Having your account closed is worse than having your account put on hold, as you probably will not be able to reopen it once you pay down your balance. This can have negative effects on your purchasing power and your credit score, due to your having less credit available. If your account is closed, you may also end up forfeiting your reward points and possibly having the interest rate default to the penalty annual percentage rate because of a terms violation.

Credit Limit Raised

This is rarer than closing your account, but if a creditor sees you are over the limit and you have a good history of paying your bills, you may be eligible for a credit line increase to automatically bring you back into good standing. This is not a solution to count on, but card issuers need your business, and if an issuer is pleased with your payment history and wants a consumer to continue using the card, a credit line increase may occur.

References

• Bankrate: What Happens When I Charge My Credit Card Over the Limit?
• Experian: The Impact on Credit Scores When You Exceed Your Credit Limit
• Ask Mr. Credit Card: Does Being Over Limit Hurt Your Credit Score?