What Happens If You Accidentally Overdraw on Your Credit Card?

Check your credit card user agreement for penalties and fees.
Image Credit: fizkes/iStock/GettyImages

When you overdraw an account, you have essentially exceeded the balance of available funds in your account. In a banking situation, your bank account would be overdrawn until you deposited more money into the account, and your bank would charge you an overdraft fee for any items that were covered despite a negative balance in the account.

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If you overdraw a credit card account, it is commonly referred to as being over the limit. The consequences vary depending on your credit card company's practices and procedures.

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Consider also:What Happens if I Charge More Than My Credit Card Limit?

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Transactions Will Be Declined

If you have accidentally overdrawn your credit card account, you may find that your credit card company refuses to process any additional transactions. Even if you have not yet exceeded your credit limit, a pending credit transaction may be denied if the transaction total will result in a credit card balance exceeding the credit limit.

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You may have a credit card transaction declined at the credit card terminal, or your credit card issuer may decline payment for any automated bills you have linked to the credit card.

Consider also:How Badly Does My Credit Score Get Affected if I Go Over My Credit Limit on One of My Cards?

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Over-the-Limit Fees

If your credit card account balance exceeds your credit limit, your credit card issuer can assess an over-the-limit fee, which can increase the credit balance even further. Your credit card issuer is required by law to disclose the fees and penalties that may be assessed.

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Based on the Credit Card Act of 2009, you can only be charged an OTL fee if you opted in to allow this. Why would you do that? Because some card issuers will honor a transaction that's larger than your remaining line of credit, but you'll have to pay an OTL fee – otherwise, your card gets declined.

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Standard over-the-limit credit card fees typically cost up to ​$35​, according to CNBC, but the federal law places limits on some of these fees, explains the FDIC. For example, your card company cannot charge you over-the-limit fees more than once per billing cycle, or charge you this fee if your interest for cycle put you over your limit.

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Consider also:How to Increase a Credit Card Limit

Your Rates Can Increase

Going over your credit card limit signals an inability to properly handle the credit that has been extended to you. Since you present a credit risk in the eyes of your credit card company, you should expect that your credit issuer may increase the interest rate you pay on your credit account.

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Going over your credit limit even one time can trigger an interest rate hike that may last for the life of your credit account. If you've just done a big balance transfer to get a 0 percent interest rate for 12 months or more, you could lose that promotional rate and have to pay your normal APR.

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You Generate Account Penalties

You could face additional fees and penalties if you accidentally overdraw on your credit card. Depending on how much and how often you exceed your credit card limit, your credit card company may consider you too much of a credit risk.

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The credit card issuer may reduce your overall credit limit, they may institute an annual fee to your account, or they may even suspend or close your account and remove your charging privileges. You would lose your ability to use your credit card, and your credit score could be negatively impacted.

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