It’s more than just a TV trope: Maxing out your credit card can have serious consequences in real life.
Often, it can be a sign that your spending habits have grown beyond your budget. But there are also times when you have the funds to pay off a large purchase, but your credit card limit isn’t enough to clear the charge.
Maybe, for example, you’re booking a vacation you’ve already saved for but want to use your card to earn bonus rewards. Or maybe you need to charge an unexpected car repair to your card but plan to pay it off using your emergency fund.
But in making those large purchases, you may find yourself closer to the limit than you expected — and risk going over your card limit or having the transaction declined. Before you reach that point, it pays to know the risks of over-limit charges and actions you can take now to avoid them.
Can you go over your credit limit?
When you open a new credit card account, one of the most important details to look for is your assigned credit limit. This is the maximum amount of money you can charge to the card.
In the past, you’d often get hit with fees for over-limit charges. Today, you may not have the option to exceed your credit limit at all.
Federal regulations prevent credit card companies from charging cardholders fees and other penalties for going over credit limits unless you specifically opt into allowing over-limit transactions. Without this consent, many issuers simply decline over-limit transactions, though some may still accept them without charging you any fees.
Because of this opt-in rule, which has been in place since the CARD Act of 2009, the Consumer Financial Protection Bureau (CFPB) calls over-limit fees “virtually non-existent.”
Capital One, for example, says it never charges over-limit fees. Depending on your account, you may be eligible to exceed your credit limit, but you’ll also have the option to disable over-limit spending anytime within your account.
If you can exceed your credit limit, the timeline to pay off the over-limit transaction varies, according to the CFPB. Some issuers may include any over-limit amount in your upcoming minimum payment, effectively requiring you to pay it off immediately. Others may allow you to keep using your card while paying off the over-limit balance like any other purchase.
What happens when you go over your credit limit?
These are the risks of going over your credit limit to keep in mind before you spend:
- Increased minimum payment: Credit card minimum payment calculations usually depend on the total amount you owe. For example, minimum payments are often the greater of a flat fee or 1% of your total balance. The more your credit card balance grows as you approach the limit, the more your minimum payment grows, too. Alternatively, your issuer may simply add the entire over-limit amount to your upcoming required monthly payment.
- Increased credit utilization: Your credit utilization ratio measures how much credit you’re using compared to your available credit. Spending close to the limit can lead to a very high credit utilization — making you look riskier to potential lenders. It’s smart to keep your credit utilization rate around 30%, and ideally closer to 10%. If you have a $10,000 credit limit, that means your balance should stay under $1,000 to $3,000 for the best effect on your credit.
- Potential fees: Over-the-limit fees may have been more common before over-limit protections were established, but be sure to check your card’s terms and conditions or reach out to your credit card issuer to see whether fees may still apply to you. If you have opted in, you may be charged up to $25 for the first over-limit transaction and up to $35 if you go over again within six months — though fees cannot exceed the over-limit charge amount.
- Credit card debt: The longest-lasting risk of maxing out a credit card is the long-term debt balances you could take on. With today’s credit card interest rates averaging over 21% APY, you could pay thousands of dollars in interest if you cannot to pay down your balances before they’re due.
Paying off your card when you meet your limit
Sometimes it’s difficult to avoid a one-off high-cost month or an unexpected large purchase. You can avoid costly interest charges as long as you pay off your very high or over-limit balance by the time your next credit card bill is due. But you may still see other effects of approaching your card limit.
For example, if your issuer charges an over-limit fee, paying the over-limit transaction won’t necessarily wipe away the fee cost. It may not save you from a credit score hit, either. The high balance can still appear on your credit report and affect your utilization, depending on when your issuer reports your account balance to the three credit bureaus.
Have a plan to pay off potential over-limit purchases before you take them on — but also consider alternatives that can help you stay under the limit.
Ways to avoid spending over your credit limit
Rather than take on the risks of over-limit spending, these options can help you avoid reaching your card’s max.
Request a credit limit increase
You may be eligible for a credit limit increase depending on your account history and financial situation.
This is a great option if you’ve had your card account for at least a few months and you consistently make your payments on time. You may be more likely to secure a higher limit if your income has increased or your credit score has improved since opening your account.
Ask your issuer if a credit limit increase is possible via phone or online chat. You can also look for the option to request an increase within your online account or mobile app.
You could get a hard inquiry on your credit when you request a credit line increase, which may temporarily affect your credit score.
Redistribute your credit limits
Some issuers allow you to move your credit limits around if you have multiple card accounts open.
For example, you may have a premium travel credit card with a very high limit from the same issuer as your everyday cash-back card. While it usually makes sense to keep the higher line of credit for travel spending, you have a large purchase you can better maximize with your everyday card — though it’ll send your balance close to the limit.
In this case, consider contacting your issuer to ask about reallocating the allowed credit limits differently between your two cards.
Open a 0% APR credit card
If you want access to more credit and a longer time to pay an upcoming purchase, a new 0% APR credit card could be a better financial solution than maxing out your current card. These cards carry introductory 0% APRs on new purchases for a limited time — typically between 12 and 18 months. After that, any remaining balance will take on interest at the card’s regular rate.
A 0% APR credit card can be helpful for larger purchases you’d like more time to pay off or periods when you know you may need to carry a balance for a few months. Here are some of the best credit cards with 0% APRs today:
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Annual fee$0
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Welcome offerNone
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Introductory APR0% intro APR on purchases and balance transfers for the first 21 months, after which the standard APR applies
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Purchase APR18.74% – 29.74% variable
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Annual fee$0
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Welcome offerEarn a $200 statement credit after spending $2,000 within the first 6 months
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Introductory Purchases APR0% on purchases for 15 months
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Ongoing Purchases APR18.74%-29.74% Variable
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Introductory Balance Transfer APR0% on balance transfers for 15 months
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Ongoing Balance Transfer APR18.74%-29.74% Variable
