What Happens When You Go Over Your Credit Card Limit?

Every credit card will have its own limit, and this is the amount of money that you will be allowed to borrow with the card.

If you were to exceed this limit, there can be lots of negative consequences, and it is really important to be aware of what could happen before it is too late.

You may end up having your card declined for a purchase, or you could damage your credit score. There are a few things that could happen if you were to go over your credit limit, and this is something that you should try and avoid at all costs. 

What Happens When You Go Over Your Credit Card Limit?

In this article, we are going to tell you everything that there is to know about what happens when you go over your credit limit, and what negative consequences this could lead to.

This will help you to understand what could happen if you went over your credit limit and why it is so important to keep an eye on your total balance.

What Is a Credit Limit?

For those that don’t already know, a credit limit is the maximum amount that you can spend on a credit card. You can sometimes change the credit limit if you are eligible to do so, but this is the maximum amount that you can speed on your card.

The credit limit that you will have on your card will be determined by the issuer when you apply for the card. Some of the factors that will be considered are:

– Your credit report and score – Your credit history is the main thing that will be considered when it comes to determining your credit card limit. Once you have applied for the card, the issuer will look at your credit report and score.

If your score is low, you will be considered as a higher risk, meaning you will be able to borrow a lower amount. If your credit score is high, you will be less of a risk, meaning you could be granted a higher limit.

– The number of accounts you have and their limits – The card issuer might also want to see how you are currently managing any of your existing cards and accounts, and this could influence their decision.

– Your financial circumstances – The lender will also consider things like your income, your financial obligations, and any existing debt that you have when it comes to making a decision. The more financially stable you are, the higher your limit is likely to be.

What Happens When You Go Over Your Credit Card Limit?

In some circumstances, you might not be able to go over our credit limit at all. However, depending on your credit issuer, you might be able to spend more than the limit that is attached to your account.

So, instead of the transaction being declined when it comes to payment, it can go through if the issuer allows it to. 

This is something that can happen if you have a long history of treating your account responsibly. You may also have opter in for over-limit protection, which is something that allows you to charge more than your credit limit at times.

However, there are several negative consequences that you might face for going over your credit limit.

The nature of these consequences will depend on the policies that are in place with the credit issuer and your credit history. It can also be determined by whether or not you have opted in for over-limit protection.

Declined Purchase

One of the most common outcomes when you try to go over your credit limit is that the purchase is declined.

If you do not have over-limit protection, the transaction will not go through if you have already hit your credit limit. This can be really bad if you are in need of something with no other way to pay.

Incurring Extra Costs

Even though over-limit protection allows you to spend more than you are technically allowed to, the downside is that the card issuer can charge you a fee for this privilege.

This fee can increase for each transaction that goes over your limit. This can lead to costs that you are unable to afford to pay back.

Putting Your Account Into Default

The last thing that you want is for your account to be considered in default, but this is something that can happen when you go over your credit limit.

The credit issuer can also increase your interest rate and reduce your card limit. They can also cancel or suspend the card or increase the minimum payment that is requested.

How Does Going Over Your Credit Limit Affect Your Credit?

Credit utilization is something that can either positively or negatively affect your credit score. Low credit utilization is attractive to lenders and will positively impact your score.

However, high credit utilization, when you have used most of your balance, can make you more unattractive to lenders and negatively impact your score.

It is generally best to try to keep your total credit utilization score under 30%, which means using less than 30% of your total available balance. The lower your credit utilization, the better.

How to Avoid Going Over Your Credit Limit

It can be really easy to lose track of how much you are spending, but it is really important to monitor your spending in order to avoid the above consequences.

You can avoid this situation by following the below methods:

– Set a fixed charging amount for the month. You should give yourself a monthly limit of how much that you wish to spend on your credit card and stick to it. Keep this amount within the range of what you can afford to pay back at the end of the month.

– Review your balance at least once a week. You can prevent your balance from becoming out of hand by looking at your credit card balance at least once a week. If the amount that you owe is getting too high, you should stop using your card to pay for things.

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