Can you go over your credit limit? What happens if you do?

It’s essential to manage your credit responsibly by keeping your credit card balances well below the credit limit. Credit card debt is growing in the US as shown by data that points to it being now worth over $1 trillion, part of the huge $17 trillion overall household debt.

In the past it was possible to exceed your credit limit on a credit card, which resulted in overlimit fees and other consequences. However, due to the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, credit card issuers are prohibited from allowing cardholders to exceed their credit limits without the cardholder’s consent.

If you find that you are frequently nearing or exceeding your credit limit, it may be a sign that you should reevaluate your spending habits and consider budgeting to avoid potential financial pitfalls.

What happens when you go over your credit limit

For this to happen you will have had to opt in to being able to exceed the limit.

If you make a purchase or incur charges that exceed your credit limit, your credit card issuer will have overlimit fee. You can be charged up to $25 the first time you exceed your credit limit, increasing to $35 if you are over your limit a second time within six months. This fee cannot be larger than the amount by which you exceeded your credit limit. This was capped by the 2009 CARD Act though adjusted each year based on inflation.

Going over your credit limit will negatively impact your credit score. Credit utilisation, which is the ratio of your credit card balance to your credit limit, is a significant factor in your credit score. Exceeding your limit increases your credit utilisation, which can lead to a lower credit score. This will have a negative effect on your interest rate, often significantly, for exceeding your credit limit.