Going over a credit card limit can have some unfortunate consequences. It can involve large penalties or extra fines and fees, a transaction could instead be denied, and it may temporarily affect your credit score. Most people worry a lot about this last consequence, but it should be stated that accidentally going over the limit once is not likely to have a long term effect on your credit rating.
Credit card companies have numerous options they can exercise when a person tries to make an over the limit purchase. Usually, if the amount is very small, they won’t deny the purchase. This is especially true if the limit had not been reached prior to the purchase. A large purchase that goes over the credit card limit by a greater amount is likely be handled different.
If a customer has excellent credit, the card company might increase the limit. It is better to call the company and ask for an increase instead of waiting for their response. Alternately, the card company can simply refuse the transaction.
Another tactic is to allow the purchase but to charge extremely high fines. These penalties should be defined in each credit offer. The amount owed on over limit expenses is usually due immediately and customers may be charged a late fee for going over a credit card limit and not paying the overage amount right away. All in all, the combination of penalties and fees may be quite high if you exceed your limit.
Sometimes, credit card companies treat going over the limit as an excuse to raise interest rates. Alternately, they may charge additional interest on any over limit amounts. It’s wise to avoid this practice because of the potential fees involved.
As for your credit rating, the credit reporting agencies tend to evaluate how much credit is available to a person. When someone has $1,000 US Dollars (USD) of available credit and uses $900 USD, there is only 10% available credit. The credit rating reflects negatively when a person uses up most of his or her available credit, and obviously going over a credit card limit will show that the person does not have any available credit.
When a person can immediately rectify this situation, this report changes quickly. The credit report would only reflect this in the month it occurred. Constantly going over your credit card limit will mean this always shows up on your credit report, however. Consumer counselors recommend that consumers use no more than 30% of their available credit to maintain a good credit rating, and this will help keep purchases from exceeding credit limits.
