Spending over your credit limit

What happens when you spend over your credit limit?

Depending on the issuer, some banks give you the option to exceed your credit limit to avoid embarrassment and inconvenience at the cash register, but you'll be notified and charged an over-limit fee if you do.

This guide will discuss the different instances that might cause you to spend beyond your credit limit and which banks let you do this and what they'll charge.

Which lenders let you spend over your credit limit and charge you for it?

How you might spend over your credit limit

Whether you simply overspent or accrued some fees that pushed you over your credit limit, there are plenty of ways you might spend beyond your credit limit. The most obvious way is that you haven't repaid your balance, used your card for a purchase and spent beyond the credit limit. However, another way you could accidentally go over your credit limit is through credit card fees. Say you used your card for an ATM withdrawal, the cash advance fee as well as the amount you've withdrawn could be enough to exceed your credit limit. If a transaction like a cash advance charge takes you over your credit limit, you usually have a day to pay the balance down before the overlimit fee applies, so it can depend on how quickly you can pay down the overdrawn balance.

As of 2012, banks and credit card issuers are required to inform cardholders when they're close to reaching their credit limit, so you will receive a notification and you'll know to either pay your balance down or leave your card at home if you're getting close to exceeding your credit limit. Most banks also give you the choice to either block the option to exceed your credit limit or the chance to exceed the limit for a fee. If you do opt to be able to exceed your credit limit, you'll have to sign a consent form and agree to pay a charge of usually between $10 and $20.

The smartest strategy is to keep an eye on your balance, pay attention to any notifications from your bank and either pay down your balance or leave your plastic at home if you're getting close to exceeding the credit limit.

How to avoid going over your credit limit

Set up online, mobile or telephone banking

The simple answer is to keep an eye on your credit card balance. There are a couple of ways you can easily do this, such as setting up internet or telephone banking. If you have a smartphone, you can download the bank app and monitor your balance at any time. It's also required by law for the lender to notify you when you're about to exceed your credit limit. If you have online, mobile or telephone banking set up, the card provider can send you a text notification when you're about to exceed your credit limit.

Impose a hard limit on your credit card account

If you have a provider that allows you to spend over your credit limit, and you're sick of incurring credit card overlimit fees, the simplest solution is to give your lender a call and let them know that you want to impose a 'hard limit' on your credit card account. This means that once you reach your credit limit, any transaction that would have taken you over limit will be declined.