What happens if I spend over credit limit?
Spending over your credit limit can have serious consequences for your financial health and credit score. Understanding the potential outcomes can help you avoid this situation and manage your credit responsibly. Here’s what you need to know about the repercussions of exceeding your credit limit.
1. Overlimit Fees
When you exceed your credit limit, your credit card issuer may charge you an overlimit fee. This fee can vary depending on the card and the issuer, but it typically ranges from $25 to $35 per occurrence. These fees can add up quickly, especially if you frequently exceed your credit limit.
2. Lower Credit Score
Exceeding your credit limit can negatively impact your credit score. Lenders use credit scores to assess your creditworthiness, and a high credit score indicates that you are a responsible borrower. When you go over your credit limit, it may be viewed as a sign of financial stress or poor money management, which can lower your score.
3. Higher Interest Rates
If you have a high credit score, exceeding your credit limit may not immediately result in higher interest rates. However, if you continue to exceed your credit limit and demonstrate poor money management, your credit card issuer may decide to raise your interest rates. This can make it more expensive to carry a balance on your credit card and can lead to higher overall costs.
4. Risk of Credit Card Revocation
In some cases, if you repeatedly exceed your credit limit, your credit card issuer may decide to revoke your card. This can be a significant inconvenience and can affect your ability to make purchases or access cash advances.
5. Difficulty in Obtaining Future Credit
Having a history of exceeding your credit limit can make it more difficult to obtain future credit. Lenders may view you as a higher risk borrower, which can result in higher interest rates, lower credit limits, or even denial of credit applications.
6. Potential Legal Action
In extreme cases, if you consistently exceed your credit limit and fail to pay your bills, your credit card issuer may take legal action against you. This can lead to wage garnishment, liens on your property, or other legal consequences.
Conclusion
To avoid the negative consequences of spending over your credit limit, it’s important to monitor your credit card spending and ensure that you stay within your credit limit. If you find yourself regularly exceeding your limit, consider reducing your credit card spending, paying off your balance in full each month, or contacting your credit card issuer to discuss your options. Managing your credit responsibly can help you maintain a good credit score and avoid the financial pitfalls associated with exceeding your credit limit.
