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

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

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,

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