What To Do If You're Over the Limit

/ BY / Credit 101

If you don’t track your credit card spending carefully, you may find yourself going over your credit limit. It’s also fairly easy to do with a card that has a small credit limit. If you’re over the limit, don’t panic.  Thanks to the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act), overlimit fees are pretty rare these days, and taking the proper steps can help you avoid going over the limit ever again.

The CARD Act and Overlimit Fees 

It used to be that overlimit fees were big business. Credit card companies charged anywhere from $25 - $39 every time you went over the limit. What’s more, they could stack charges, allowing them to push your balance over the limit (for example, if your payment was late and you were charged a late fee and that late fee put your balance over your credit limit, you would be charged an overlimit fee as well).

After that CARD Act went into effect in February 2010, the way overlimit fees were structured changed significantly. Under the new laws:

  • You must opt-in to permit the card issuer to process transactions that will put you over the limit. If you don’t opt in, your card will be declined at the register if you attempt to make a purchase that will put you over the limit.  
  • Credit card companies can’t charge a fee unless you have specifically given permission to the credit card company to process overlimit transactions.
  • If you are charged a fee, the fee cannot be more than the minimum payment. Standard fees for going over the limit are $25 for the first offense and $35 for the next.

As a result of this act, the number of people charged overlimit fees has been reduced to a mere 1%.

What to Do if You're Over the Limit

Even if you don't get charged a fee for going over your limit, you should still avoid it as much as possible. About one third of your credit score is based on your available credit, or how much credit you use compared to how much you have. When you max out or exceed your credit card limit, your credit score drops. 

However, we all make mistakes. If you find you've gone over your limit, take these steps to get back on track: 

  • Get your balance below the limit as soon as possible. Don't wait until you get your next bill in the mail. 
  • If you have been charged a fee, make sure you pay the fee as well as bringing your balance below the limit before the  next billing cycle. 
  • Opt out of overlimit transactions. If you had no idea you can opt out of going over the limit, or if you opted in, now's the time to revoke that ability. According to the CARD Act, you have the right to opt out at any point.  Contact your credit card company and tell them you do not authorize them to process over limit transactions. 

Once you've brought your balance down below the limit, it's time to address the bigger issue--your spending habits. Going over the limit is a sign you're relying too heavily on credit. It can also be the beginning of a vicious cycle of opening up new lines of credit once you’ve maxed out your credit card.

The Credit CARD Act has made overlimit fees primarily a thing of the past. It’s still smart to monitor your credit use and spending habits to make sure you’re well below your credit limit.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.