What should I know about exceeding a credit card's limit?

Going over your credit card limit can have some unfortunate consequences. It may involve large fines or additional fines and fees, a transaction may be denied, and it may temporarily affect your credit score. Most people worry a lot about this last consequence, but it should be noted that accidentally exceeding the limit once is unlikely to have a long-term effect on your credit score.

Credit card companies have numerous options they can exercise when a person tries to make an over-limit purchase. Usually, if the quantity is too small, they will not deny the purchase. This is especially true if the limit has not been reached prior to purchase. A large purchase that exceeds your credit card limit by a larger amount is likely to be treated differently.

If a customer has excellent credit, the card issuer may increase the limit. It's better to call the company and ask for a raise than wait for a response. Alternatively, the card company may simply decline the transaction.

Another tactic is to allow the purchase but charge extremely high fines. These sanctions must be defined in each credit offer. The amount due for excess is usually due immediately and customers may be charged a surcharge for going over their credit card limit and not paying the excess amount immediately. In short, the combination of fines and fees can be quite high if you exceed your limit.

Sometimes credit card companies try to go over the limit as an excuse to raise interest rates. Alternatively, they may charge additional interest on any amount above the limit. It is advisable to avoid this practice due to the possible fees involved.

When it comes to your credit score, credit reporting agencies tend to assess how much credit is available to a person. When someone has $1,000 of available credit and uses $900, there is only 10% credit available. Credit score reflects negatively when a person uses most of their available credit and obviously exceeding the credit card limit will show that the person has no available credit.

When a person can immediately correct this situation, this report changes quickly. The credit report would only reflect this in the month it occurred. However, constantly going over your credit card limit means that it always shows up on your credit report. Consumer advisors recommend that consumers use no more than 30% of their available credit to maintain a good credit rating, and this will help prevent purchases from exceeding credit limits.