ADVERTISEMENT

How far can I go over my credit limit before my card gets declined?

Charging on a maxed-out card can affect your credit terms, score

By  |  Published: April 8, 2017

Credit Smart
Credit Smart columnist Susan C. Keating
Susan C. Keating is the president and chief executive officer of the National Foundation for Credit Counseling. Prior to joining the NFCC, Keating spent 29 years in financial services. She was the highest ranking female CEO of a U.S. bank holding company, serving as president and chief executive of Allfirst Financial Inc., the largest U.S. holding of AIB Group. She currently serves on Bank of America's National Consumer Advisory Council and is a board member of the Council on Accreditation. Keating also participates in the Financial Regulation Reform Collaborative, a nonpartisan group committed to finding solutions for reforming financial services regulation.

Ask a question.

'Credit Smart' archive

Question

Dear Credit Smart,
This week has been kind of wild – I lost all the actual money in my bank account in an internet scam while selling my laptop. I have two $300-limit credit cards. I know it is not advisable to overuse, but I made a minimum payment on one last month – $25 – and the balance is now $302 with most of the billing cycle left. The other one is right at $300. For my first month, I plan to make a payment when I get paid. Just so I can live within my means – how do I know how far over my credit balance I can go before my cards get declined? – Jordan

Answer

Dear Jordan,
The way I interpret your question, it seems that you are already at your credit limits on these cards. What this means is that you are in danger of being declined right now. There really is no magic formula that lets you know how far over – if at all – you can go with your credit cards. That is up to your creditor. I can tell you that when you attempt to make a purchase that goes over your credit limit, one of three things will happen:

  • Your transaction will be declined, or
  • Your transaction will go through, but you will be charged an over-limit fee, or
  • Your transaction will through without a fee being charged.

Assuming your transactions do go through, with or without a fee, you need to know what could happen next. Your accounts are always subject to review by your creditor. If that happens, they may then elect to reduce your credit limit and/or increase your monthly minimum payment.

You should also know that going over your limit will almost certainly have an impact on your credit score because your credit utilization will be at 100 percent and your available credit will be zero. Credit utilization – the amount of credit being used from the total made available to you by your creditor – and available credit are both important factors in credit scoring.

Temporary relief
All of this aside, the real issue here is how you can live within your means right now. You obviously need to have some funds available immediately. This may mean borrowing from a friend or family member or seeking additional employment. You could also sell something you own, although I understand that is what inadvertently led to your current predicament. Still, if you have anything else you can sell for immediate cash, that would certainly help.

You also need to take a hard look at your monthly expenses, and see if there are areas you can either reduce or cut out completely, at least for the time being.

  • Some expenses, like rent and car payments, are fixed.
  • Others, such as gas and groceries, are usually more flexible and can be trimmed as needed.
  • Areas to cut out completely for now include entertainment and eating out.

If I have read your question wrong and you actually have $600 in available credit on your cards, that is the maximum amount I believe you can safely count on for help through this time. You say you know that this is not advisable, and you are correct. However, credit cards can provide a bit of a safety net in a temporary situation.

  • You must be very careful how you choose to spend your credit dollars, and come up with a plan to pay it back as soon as you possibly can.
  • Pay your bills on time, every time. This is what is best for both your credit score and your overall financial health.

Late payments carry financial penalties and do damage to your credit score fairly quickly. It is far easier to damage your score than it is to rebuild it to where it was before.

Remember to always use your credit smarts!

See related: What happens when you go over your credit limit?4 creative ways people cut their spending,

Meet CreditCards.com's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

ADVERTISEMENT
ADVERTISEMENT

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Updated: 08-20-2017

ADVERTISEMENT


Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


ADVERTISEMENT