What happens if I make a purchase above my credit limit?

Consequences of Exceeding Credit Limits

Maintaining responsible credit usage is essential for financial well-being, and exceeding credit limits can have significant consequences. When a purchase exceeds the approved credit limit, the cardholder faces the following repercussions:

Over-the-Limit Fees:

Exceeding the credit limit triggers over-the-limit charges, which are typically capped at $35 per unauthorized transaction. These penalties can add up quickly, especially if multiple charges are made beyond the approved amount.

Damage to Credit Score:

Exceeding credit limits can negatively impact a credit score. Payment history plays a significant role in credit scoring, and missed or late payments resulting from over-limit fees can lower the score.

Debt Accumulation:

Continuously exceeding credit limits leads to debt accumulation. Over time, the interest charges on the outstanding balance can become substantial, making it difficult to repay the debt.

Account Closure:

In extreme cases, the credit card issuer may close the account if repeated over-the-limit charges occur. This can be particularly damaging if the credit card is relied upon for regular expenses or has a good credit history.

How to Avoid Over-the-Limit Charges:

To avoid the penalties associated with exceeding credit limits, it’s crucial to be mindful of spending. Here are some tips:

• Track expenses: Regularly monitor your credit card balance and remaining credit limit.
• Set spending alerts: Most credit card issuers offer alerts that notify you when you approach or exceed your credit limit.
• Pay off balances early: Paying off balances promptly reduces the amount of interest charged and lowers the balance used towards your credit limit.
• Request a credit limit increase: If you consistently find yourself exceeding your credit limit, consider requesting an increase from the credit card issuer. However, be aware that this may impact your credit score.

By adhering to these guidelines, cardholders can avoid the consequences of exceeding credit limits and maintain a healthy financial standing.