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This article was last updated Oct 31, 2019. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.
You’re probably familiar with “overdrafting” if you’ve had a bank account. It’s when you spend more than you actually have, but the bank allows the charge to go through. If you’ve ever wondered if it’s possible to overdraft a credit card, you can’t exactly — because an overdraft is specific to a bank account — but you can sometimes spend over your card’s credit limit if you’ve given the issuer permission.
In this article:
- Can you spend over your credit limit?
- How much will it cost if you go over your credit limit?
- What spending over your limit does to your credit score
- Ways to recover after spending over your credit limit
- How to avoid going over your credit limit
- The bottom line
Can you spend over your credit card’s credit limit?
The short answer is yes, but only if you’ve opted in to the ability to go over your credit limit. Otherwise, your purchase will likely be denied.
However, once you “opt in” to over-the-limit charges, you are also agreeing to any “overlimit fees” that issuer may charge you for doing so. “If you’ve gone over your credit limit, you’re paying extra fees for the right to do that,” said Lynnette Khalfani-Cox, a personal finance expert and author also known as “The Money Coach.”
An overlimit fee is usually up to $25 for the first offense and up to $35 for the second time within six months. Issuers must give you certain disclosures before you opt in and a confirmation after you’ve opted in. After you’ve set this up, you can opt out at any time.
Prior to the passage of the Credit Card Accountability Responsibility and Disclosure Act of 2009, more commonly known as the Credit CARD Act, issuers could smack you with overlimit fees each and every time you go over your limit, even if it was just a few cents over.
“The Credit CARD Act really changed the game when it comes to overlimit fees,” said Matt Schulz, chief industry analyst for CompareCards.com. “Now, you can only be charged fees for exceeding your card’s credit limit if you specifically opt in. Otherwise, a purchase that pushes you over the credit limit will just be declined.”
However, even if you’ve opted in to allow overlimit fees, your card issuer can still decide not to authorize a charge that goes over your credit limit, according to the Consumer Financial Protection Bureau (CFPB).
How much will it cost if you go over your credit limit?
When you agree to allow overlimit fees, your issuer should disclose the amount of those fees prior to your agreement. Typically, you can be charged a fee of up to $25 the first time you exceed your credit limit, according to the CFPB. For the second time within a six-month period, that fee can be up to $35.
In any case, the fee cannot be larger than the amount by which you went over your credit limit. For example, if a new purchase caused you to go over your credit limit by $10 and you opted into overlimit fees, you should not be charged the full first-time $25 overlimit fee.
What spending over your limit does to your credit score
Maxing out a credit card is one of the worst things you can do to your credit score, only second to falling behind on your payments. The rule of thumb is to keep your utilization ratio (how much of your available credit you’ve used) less than 30%. For example, if you have a card with a credit limit of $5,000, you shouldn’t charge more than $1,500 to it at any point.
“The higher that percentage, the worse it is for your credit score,” Schulz said.
Your utilization ratio is examined both at the level of individual cards and across all your cards as a whole. So if you’ve maxed out your only credit card, that’s going to be bad for your score. If you have another card with a lower utilization ratio, however, maxing out one card is still going to be bad for your score, but the credit score impact will be less painful.
Ways to recover after spending over your credit limit
If you’ve maxed out your card and then some, you should expect to see your credit score drop. But there are some steps you can take that, with time, can help you bring it back up:
Pay down your balance. Though it might be easier said than done, this is the best thing you can do after having spent more than your credit limit. Devise and stick to a debt repayment plan to knock that debt down. Put your cards in a drawer and stick to using cash or debit until you get your balances down to a more manageable level. Know that making only the minimum payments won’t get you to zero fast enough as minimum payments often go toward paying off interest charges as well as the principal.
Ask for a credit limit increase. If your credit score is still good, you might have success calling your credit card issuer and asking for a higher credit limit. If you have a low credit limit that you keep bumping against, but have had the card for a year or more and have paid on time every time, the odds of being approved for a higher credit limit should be in your favor.
“People would be surprised at how often this works,” Schulz said. “However, it is incredibly important that you not simply see the credit limit as an excuse to spend. That would only make a bad situation far worse.”
Get a balance transfer card. Balance transfer cards tend to be aimed at consumers with good-to-excellent credit.
These cards generally offer anywhere from 12 to 21 months of 0% introductory APR on balance transfers, which can give you a chance to pay down card debt without accruing interest charges. You might pay a fee (typically 3%-5% of each amount you transfer), but what you may save in interest may be worth it. Note that you can’t transfer a balance between cards from the same issuer.
Before you consider a balance transfer card, do the math first. Check out our balance transfer calculator to figure out if a balance transfer card is right for you.
Apply for a personal loan. If you’re struggling with credit card debt, a personal or debt consolidation loan might provide the opportunity to lock in a lower interest rate. A loan also gives you a fixed amount you have to pay each month for a fixed amount of time, which can help if you find yourself tempted to prolong debt due to a credit card’s flexibility.
One way to see which loans you might qualify for and compare offers from a variety of lenders is to check out LendingTree, the parent company of CompareCards.com. You can sign up for free, enter details about what kind of loan you’re looking for, and LendingTree will try to match you with up to five different lenders who can then provide specific offers with loan amounts and interest rates.
How to avoid going over your credit limit
If you haven’t opted in
Your card issuer is legally prohibited from allowing you to spend more than your credit limit and then charging you overlimit fees — unless you’ve agreed to it. If you haven’t opted in, you won’t be allowed to add purchases that will take you over your credit limit.
This means you should plan ahead. If you’re close to maxing out your credit limit and have a big purchase coming up, you might want to consider applying for a new card that offers 0% introductory APR on purchases, which could give you time to pay off your purchase without accruing interest charges. Or, you can pay down a large chunk of your balance before adding any new debt.
If you have opted in
For those who have opted in to allow overlimit fees, know that you can opt out at any time. This won’t apply retroactively if you’ve already gone over your limit — you’ll still have to pay a fee for that. But contacting your issuer and opting out can prevent you from going over your limit and incurring fees in the future.
The bottom line
So yes, you can spend over your credit limit and be charged an overlimit fee, but only if you’ve opted in to do so. An attempt to spend more than your limit should result in a denied transaction if you’ve declined to opt in. If you opt in, though, know that you’ll be charged for the privilege — overlimit fees are usually up to $25 for the first time you go over your limit, then up to $35 for the second time you exceed your limit within six months.
You can opt out at any time — but it won’t apply retroactively once you’ve exceeded your limit. At that point, consider options like asking for a higher credit limit, applying for a balance transfer card or applying for a personal loan. Your goal should be to pay down your credit card debt as quickly as you reasonably can, since a maxed-out card is bad for your credit score.