Going over your credit limit usually does not immediately impact your credit, particularly if you pay down your balance to keep the account in good standing. However, an account that remains over its limit for a period of time could be declared delinquent, and the issuer could close the account.
Your credit scores may go down
Maxing out your credit card can cause a high credit utilization ratio. This ratio is a percentage of how much credit you're using versus your total available credit. The Consumer Financial Protection Bureau (CFPB) says to keep your credit utilization ratio below 30%.
Impact on Credit Score: Going over your credit limit can negatively affect your credit score. Credit utilization (the ratio of your credit card balances to your credit limits) is an important factor in your credit score. Exceeding your limit can signal to lenders that you are over-reliant on credit.
If you've hit—or surpassed—a credit card limit, it may cause the issuers of your other credit cards to lower your credit line—even if you haven't maxed out those other credit cards. By maxing out your credit card, you could: Negatively impact your credit score by increasing your credit utilization.
Yes, you can go over your credit limit, but there's no surefire way to know how much you can spend in excess of your limit. Card issuers may consider a variety of factors, such as your past payment history, when deciding the risk of approving an over-the-limit transaction.
Your available credit limit considers both your posted and pending transactions. If you spend more than your available credit, over limit fees will apply.
If you go over your credit limit, your card could be declined. If you're part of the optional over-the-limit coverage program, you could also be charged a fee for each billing cycle that you exceed your credit limit. Your credit card company must tell you how much these fees are before you opt in.
Helps keep Credit UtiliSation Ratio Low: If you have one single card and use 90% of the credit limit, it will naturally bring down the credit utilization score. However, if you have more than one card and use just 50% of the credit limit, it will help maintain a good utilization ratio that is ideal.
Balance transfer fee. This fee will typically be 3% to 5% of the amount transferred, which translates to $30 to $50 per $1,000 transferred. The lower the fee, the better, but even with a fee on the high end, your interest savings might easily make up for the cost.
You may face the temptation to overspend as you have a higher credit limit, and you may end up spending beyond your budget and means. Having a greater credit limit increases the likelihood of maintaining outstanding balances, which can lead to accruing interest charges if these balances are not fully paid each month.
Credit scoring models may consider the highest utilization rate on a revolving account in addition to your overall utilization rate. Having a card with a very high utilization rate, such as 100%, can hurt your credit score even if your overall utilization is relatively low.
Key takeaways
Depending on your issuer, going over your available credit can lead to extra fees, declined transactions or even a closed account. Capital One cardholders are never charged overlimit penalties on credit card balances. View important rates and disclosures.
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
A credit card over-limit fee is a charge imposed by your credit card issuer when you exceed your credit limit. Your credit limit is the maximum amount you can borrow on your credit card. When you go beyond this limit, the over-limit fee is triggered.
Generally, your overpayment will appear as a credit in the form of a negative balance on your account. This negative balance will roll over towards any new charges you make or outstanding balances for the next month.
While it is permissible to use 100% of your credit card limit, it is not recommended. Maxing out your credit card can adversely impact your credit score, limiting future borrowing options. Moreover, a high outstanding balance incurs substantial interest, putting you at risk of falling into debt.
Using more than 30% of your available credit on your cards can hurt your credit score. The lower you can get your balance relative to your limit, the better for your score. (It's best to pay it off every month if you can.)
Increasing your credit limit could lower your credit utilization ratio. If your spending habits stay the same, you could boost your credit score if you continue to make your monthly payments on time. But if you drastically increase your spending with your increased credit limit, you could hurt your credit score.
An 800 credit score generally holds more value than $100k in cash when it comes to purchasing power. A strong score tells lenders you're a low-risk borrower, which opens doors to lower interest rates, better loan terms, and larger loans. Cash helps with immediate purchases but doesn't increase your borrowing power.
Going over your credit limit can result in declined transactions, over-the-limit fees and a possible decrease in your credit score.
However, you can save your score from the negative effects of a maxed-out credit card if you can pay off the balance in full before the statement period closes. If you do this, the maxed-out balance would not get reported to the credit bureaus. That will also help you avoid interest on credit cards.
Each credit card in your wallet has its own credit limit, which is the maximum amount you can charge to your account. If you make a purchase that pushes you over that limit, you may be subject to an overlimit fee. For Canadian bank-issued credit cards, overlimit fees typically range in the $25-30 range.