What happens when I charge my credit card over the credit limit offered?
Staying under the credit limit you have been offered is a really credit card good strategy, since going over that figure can lead to extra fees and a higher interest rate. It can also affect your credit score, so you will want to watch your account balance carefully.
Extra Fees for Going Over Your Limit
If you happen to go over your credit limit by even a couple of dollars, the credit card company may hit you with a hefty fee. This can be as much as $30 added to your bill. If you are unable to bring your account balance down to below the credit limit in the next month, you will be charged the same amount each month until you do so. If you have gone over your limit, you may want to contact the credit card issuer to see if they will agree to increase your credit limit. You can save yourself the over limit fees if you are able to make this arrangement.
Higher Interest Rates
Another consequence of going over your credit limit is that the credit card company may charge you a higher rate of interest going forward. Depending on the company in question, being over the limit once may be enough to trigger an adjustment in the interest rate you are being charged.
When you got the credit card, the company’s policy regarding interest rate terms was listed in the cardholder agreement that came with it. Most people don’t bother to read what is written there or if they do they only skim it briefly. If you open your statement and find that the interest rate on your card has increased, go back to the cardholder agreement to make sure that the company is acting according to its provisions.
Cardholder agreements are updated from time to time and your credit card company will send you the new one at that point. By keeping the account open and continuing to use the card, you are agreeing to the new terms, whether you actually took the time to read them or not.
Going Over the Limit and Your Credit Score
When you go over your limit on your credit card, over limit fees
and higher interest rates aren’t the only thing you need to be concerned with. Your credit score will also take a hit when you do so. The extra fees and the interest rate you are being charged on your credit cards doesn’t appear on your credit report, which is a piece of good news.
However, the amount that you owe on your credit card and the credit limit does appear on your credit report. Anyone who pulls it can see that you have exceeded your credit limit and by how much. This fact may make it harder for you to obtain credit in the future. If you are able to get credit, you may be charged a higher interest rate than someone who doesn’t have the same kinds of things on their record.
If you have charged your credit cards close to your account limit, the best thing that you can do is to stop using them until you are able to pay them down. Some credit card companies will allow customers to charge small purchases that put them over their credit limit but will decline larger ones. Before heading out to make a larger purchase, you may want to call the credit card company to find out how much room you have so that you don’t have to find out that your credit is no longer good once you get to the cashier.
As you pay down your credit card balance, you will save on over limit fees. If you have been able to stay under your limit for several months and the company had increased your interest, you may want to contact them to ask whether you qualify for a lower rate since you have shown that you can stay within the limit they have set for you.
If going over your limit was an isolated incident and not a monthly occurrence, the company may be willing to be flexible and offer you the lower interest rate you have asked for. A long-term customer is what they want, and you always have the option of considering switching your balance to a credit card offering a lower interest rate than the one you already have. To find out about the best low interest credit cards and all of the other options available to you, check out our free credit card “chaser” tool today!