Here's What Happens When You Go Over Your Credit Limit

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  • Most issuers let you set your card to automatically reject transactions that would put you over your credit limit, lest you be charged a fee for going over the limit.
  • The biggest issue with a maxed-out card is the credit damage from sky-high utilization.
  • Not all cards have hard credit limits; charge cards tend to have variable limits that fluctuate based on your spending and payments.

Every credit card you own represents a line of credit you have with a bank. Your credit limit is the maximum credit line the bank wants to extend to you. In other words, it's how much money they feel you can reasonably borrow and repay.

For normal everyday purchases, you probably don't need to think about your credit limit. Even low-limit cards shouldn't balk at a trip to the grocery store, for instance. But many of us have had occasions where our card's limit simply isn't enough. In fact, one survey found that as many as 60% of U.S. cardholders have hit the limit on a credit card before.

While there can be some potentially negative consequences to going over your card's credit limit, many of them are reversible if you can pay it down quickly. Here's what to expect.

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Transactions will likely be rejected

In general, transactions that would put you over your credit limit should be denied, meaning you won't be able to make the purchase at all. This can be embarrassing if it happens in a store or -- worse -- at a restaurant. Having the transaction denied may actually be for the best, however, as it could help you avoid a fee.

That said, not all issuers will automatically reject over-limit transactions. You can typically control how your card reacts in this case by adjusting your card settings through your online account. (I strongly recommend setting your card to deny over-limit transactions.)

You might get hit with a fee

If your card isn't set to deny the transaction and you end up over your limit, you could now be stuck with an over-limit fee. The amount -- or existence -- of the fee can vary by issuer and even by card, so be sure to check your card's Schumer Box to see if there's an over-the-limit fee.

Your credit score will probably drop

Arguably the worst consequence of going over your credit limit -- or even just getting close to it -- is the potential damage to your credit score. That's because a full 30% of your FICO® Score is based on your Amounts Owed.

This credit score factor looks at two things:

  1. The credit utilization of each card you own
  2. Your overall credit utilization

Credit utilization, usually expressed as a utilization rate, is the ratio of your credit card balance over your total credit line. For example, if you have a $1,000 balance and a $5,000 credit limit, your utilization rate is: $1,000 / $5,000 = 0.2 = 20%.

It's generally recommended that you keep your utilization ratio below 30%. Folks with the highest credit scores tend to keep their utilization below 10%.

Maxing out a credit card means your utilization will skyrocket up to 100%, which can seriously hurt your credit score. On the bright side, paying down your balance will reverse this damage, but it could cause an issue if you need to apply for other credit or can't pay down the balance quickly.

Cards without limits

The majority of credit cards have hard credit limits. (You can generally find them in your account, either online or in the mobile app.) Some cards, however, aren't quite so strict.

For example, you may end up with a charge card. On the day to day, charge cards operate just like regular credit cards. The main difference is that charge cards don't let you carry a balance from month to month; you have to pay in full every billing period.

The other difference? Most charge cards don't have hard credit limits. Instead, they have a variable limit that shifts depending on your spending and payment habits. Most charge cards offer a quick tool in your online account that lets you see if a particular purchase amount will be approved at any given time.

Going over your credit limit is never a good thing. But it's not typically the end of the world, either. While you might get hit with a fee and deal with some temporary credit damage, a lot of the consequences can be reversed so long as you pay your balance in full.

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