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

There is no such thing as a perfect borrower. Many consumers have experienced overdraft fees or spent beyond their means from a bank account. If you spend beyond your credit card limit, however, fees can accumulate much faster than with a bankcard or cash. Be prepared for the financial repercussions once your overspend with your credit card to avoid deepening your debt.

Over-the-Limit Fees

An over-the-limit fee is imposed when you exceed your credit card limit. Fees vary by credit card company, but commonly are $25 to $35. Unfortunately, over-the-limit fees are charged to your credit card, causing your balance to rise even higher. Over-the-limit fees are not based on how high your credit limit is. Even a credit card with a $100 limit incurs steep penalty fees for exceeding its limit. Once your balance is raised, you fall deeper into debt. Each month you are unable to bring your balance beneath the limit, a fee is charged to your account.

Declined Credit Rating

Creditors report your credit activity to the three major credit bureaus every 30 days. Exceeding your credit limit wreaks havoc on your credit score. One of the largest factors affecting your credit score each month is the amount of debt you have versus your available credit limit. This relationship between your debt and credit is called your credit utilization ratio. According to Bankrate, a good credit utilization is 30 percent. Anything above this percentage hurts your credit score. Maxing out your credit card means your credit utilization is more than three times the recommended credit utilization ratio. Each month your balance is above your limit, your credit score is negatively impacted.

Extended Finance Charges

Each month your balance is not paid in full, you incur monthly finance charges. According to Wells Fargo, the charge is calculated on the statement closing date by multiplying the average daily balance on the account by the interest rate (the annual percentage rate divided by 12). Depending on the amount of the balance, these fees can be steep with a balance over the limit. Finance charges can be avoided as long as the balance is paid in full before your next due date.

Interest Rate Penalty

Penalty interest rates are imposed when you default on your credit card agreement. For example, exceeding your credit limit, paying after your due date or skipping a payment are all reasons for your credit card company to raise your interest rate. The median penalty interest rate on a credit card, as of 2011, is 29.9 percent. If you have a positive relationship with your credit card company, it instead might automatically raise your credit limit in lieu of a penalty APR to accommodate the extra charges.

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