It’s tempting to opt out of over limit purchases because you don’t want to be left with a red face at the grocery store by receiving a “credit card declined” notification.

But the short term embarrassment may be better than a longer term impact to your cost of borrowing and creditworthiness.

Only you can make the decision for your own personal financial situation. If you do decide to allow over limit transactions, your credit card issuer will only permit a fixed amount so don’t think you’ve got a green light to spend liberally without a ceiling.

By choosing to have transactions declined when they exceed your credit limit, you avoid by default the credit limit fees that may otherwise be assessed.

How Over Limit Fees Work

Not all credit card issuers impose over limit fees when you go over your credit limit. But don’t think you’re out of the woods even if they have a zero-fee policy.

Credit card issuers can penalize you with other charges, such as higher interest rates and higher minimum payment requirements.

When you spend more than your limit, your credit card issuer will make a calculated assessment that you are struggling to budget responsibly and higher interest rates reflect the higher risk you pose to them.

Paradoxically the more they charge, the harder it is to keep up with payments but there is no getting around it unfortunately.

One piece of good news is that if a credit card issuer does charge a penalty fee, the amount is limited to no more than the excess beyond your limit.

So, if your credit limit was $5,000 and you spent $5,045, the fee applied could not exceed $45.

Credit Card Tips

Rather than wonder what happens if you go over your credit limit, contact your credit card issuer and request an increase in your credit limit.

If you have a history of making payments on-time and paying off your credit card balance each month, your credit card company may be willing to extend you a larger line of credit.

Another possibility is to pay off a portion of your balance before it is reported to the credit bureaus (Experian, Equifax, and TransUnion), which typically happens at the account statement closing date.

Even if your credit utilization remains high but you ensure your balance is below the limit, you may be able to avoid over limit fees, higher interest rate charges, and higher minimum payments.

Lastly, consider splitting a payment across a few credit cards rather than max out a single credit card.

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