Virtually all credit cards come with a spending threshold that you’re not supposed to go beyond. This is known as your credit limit. It’s sometimes possible to spend past it, but doing so isn’t usually referred to as an overdraft.
We’ll go over what exactly an overdraft is, how it’s possible to go over your credit limit on a credit card, and the implications that overspending can have on your credit and finances.
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Why you can’t overdraft a credit card
Strictly speaking, there’s no such thing as a credit card overdraft. The term “overdraft” is used with regular bank accounts. It means that you’ve spent more than the amount of money available in your account.
When you overdraft, your bank is essentially extending you credit to cover the extra money you spent.
By contrast, every purchase you make on your credit card counts as an “extension of credit.” When you go over your credit limit, you’re using more credit than you were authorized to spend, but although people sometimes refer to this as overdrafting, that’s not technically correct.
Is it always possible to spend past your limit on a credit card?
No, it isn’t always possible to go over your limit on a credit card—that depends on the terms of your agreement with your creditor. You may be allowed to spend a certain amount beyond your credit limit, or your card could simply be declined if you try.
We’ll explain the consequences of exceeding your limit in more detail below.
Can you overdraft a debit card?
Yes, you can overdraft a debit card, but only if your bank account has overdraft protection. This is where your bank agrees to cover overdraft charges up to a certain amount. 1
If you have a debit card that allows overdrafts, you can use it to make purchases or withdraw cash from an ATM even if you don’t have enough funds in your bank account. These transactions may come with an overdraft fee.
What happens if you try to go over your credit limit?
As mentioned, you may or may not be able to spend beyond your credit limit on a credit card. If you try, there are a few consequences you should be prepared for.
Declined transactions
By default, most credit cards won’t allow you to go over your credit limit. Unless you’ve agreed to over-the-limit transactions, there’s a good chance that your card will be denied.
Although getting declined for a purchase won’t hurt your credit or incur any extra fees, it may be embarrassing or leave you in a tough spot if you have no other way to pay for your transaction. 2
Over-limit fees
If you opted into over-the-limit coverage, your credit card issuer can authorize card transactions that exceed your credit limit, but they’ll be allowed to charge you extra fees, known as overlimit transaction fees.
Your credit card company can generally charge you up to $25 for your first overlimit transaction and up to $35 for going over your limit a second time within 6 months. 3 However, they can only charge you this fee once per billing cycle. 4
Thankfully, under the Credit CARD Act of 2009, your credit card issuer isn’t allowed to charge you overlimit fees unless you’ve expressly agreed that you want them to allow over-the-limit transactions. 4
Impact on credit score
Spending past your credit limit won’t be recorded on your credit report, so it won’t hurt your credit score the same way an actual derogatory mark (such as a late payment) will.
However, maxing out your credit card will still hurt your credit score by raising your credit utilization ratio, and the same is true for going over your credit card limit.
Your credit utilization rate (also known as your debt-to-credit ratio) is a percentage representing how much you’re spending on your revolving credit accounts (i.e., your credit cards). The less of your credit that you use, the better, so overcharging to your credit card can dramatically lower your credit score from one month to the next.
Additionally, racking up large amounts of credit card debt can make it harder to keep up with your credit card bills and your payments on other types of credit accounts. If you start sending in late payments or stop paying your bills entirely, your credit score will suffer even more serious damage.
How to avoid going over your credit limit
While it may seem like a nice perk to be able to go over your credit card limit every once and a while, using more credit than what’s available to you can lead to problems with your finances and credit score.
Here are steps you can take to avoid going over your credit limit:
- Opt out of over-the-limit coverage: Call up your credit card company and ask if your credit card contract currently allows over-the-limit spending. If it does, then just ask to opt out.
- Request a credit limit increase: One way to prevent overspending is to increase your available credit limit. Credit card issuers sometimes do automatic credit limit increases, but you can also ask them directly to raise your credit spending limit.
- Open a new credit card account: Getting another credit card and dividing your expenses between your two cards is another way to lower your credit utilization and stay under your limit. However, this is only a good idea if you’re in control of your spending; if you’re struggling, focus on getting out of credit card debt before you apply for any new credit accounts.
- Make additional payments: You don’t have to make just one credit card payment per month. If you have the free cash, consider making two or more monthly payments to free up your available credit. If you can, it’s always good to pay your credit card off in full every month.
Ultimately, as nice as it is to have the option to spend beyond your credit limit, you’ll be better off financially if you keep your spending as low as possible on credit cards. Additionally, low credit card balances will benefit your credit score and show that you’re a responsible borrower.
