What happens if I pay for something over my credit card limit?

Consequences of Exceeding Your Credit Card Limit

Using your credit card beyond its established limit can have serious financial repercussions. Exceeding your credit limit can lead to an accumulation of fees and potentially harm your credit score.

Over-Limit Fees

The primary consequence of exceeding your credit limit is the imposition of over-limit fees. These fees vary among credit card issuers but are typically around $35 or more. Each transaction that exceeds your limit will incur a separate fee, which can accumulate quickly. For example, if you make several purchases totaling $100 over your limit, you could face fees amounting to $105 or more.

Impact on Credit Score

Exceeding your credit limit can also negatively impact your credit score. Credit utilization, which measures the amount of credit you’re using relative to your total available credit, is a key factor in determining your score. When you use more than 30% of your available credit, it can signal to lenders that you may be overextending yourself financially. This can result in a lower credit score, which can make it more challenging to obtain loans or qualify for credit cards with favorable terms.

Other Potential Consequences

In addition to fees and a lower credit score, exceeding your credit limit can also have other potential consequences:

• Interest charges: Interest on your balance can increase if your credit limit is exceeded, as the higher balance will incur more interest.
• Account closure: In severe cases, your credit card issuer may close your account if you repeatedly exceed your limit.

How to Avoid Exceeding Your Credit Limit

To avoid the consequences of exceeding your credit limit, it’s important to track your spending and monitor your balance regularly. You can set up alerts or use budgeting tools to stay within your limit. If you find yourself close to exceeding your limit, contact your credit card issuer to see if they can temporarily increase your limit or make arrangements for a payment plan.