What happens when you spend over your credit limit?
Do you often spend over your credit limit? If the answer is yes then you’re probably familiar with credit card overlimit fees.
It’s when you spend over your credit limit, even by as much as a dollar or two, either through a purchase or ATM withdrawal, and get charged a fee for doing so.
You may even be charged an over limit fee if you exceed your credit limit from something like a cash advance fee that has been charged to your account. If a transaction like a cash advance charge takes you over your credit limit, you usually have a day to pay the balance down before the overlimit fee applies, so it can depend on how quickly you can pay down the overdrawn balance. And with some overlimit fees being as high as forty dollars, over limit fees on credit cards can be a real source of pain.
Most providers will still allow cardholders who opened an account before the 1st of July 2012 to go over their credit limit. And charge a fee in the process. If you prefer the flexibility of being able to exceed your credit limit, most providers allow you to do so by signing a consent form and agreeing to a charge of $10-$20.
So as you can see it’s not difficult to incur this charged, and with some providers this fee can be greater than the annual fee on their low rate credit card products. So it pays to keep an eye on your account balance at all times if you’re the type of cardholder who regularly spends up to their credit limit.
Which lenders let you spend over your credit limit and charge you for it?
|Bank of Melbourne|
|Latitude Financial Services|
How to avoid going over your credit limit
Set up internet or telephone banking
The simple answer is to keep an eye on your credit card balance. There’s a couple of ways you can easily do this – set up internet or telephone banking. If you have a smartphone, which most of us do, this means your account balance is just a click away. It’s also required by law for the lender to notify you when you’re about to exceed your credit limit. If you have internet and telephone banking set up, the card provider can send you an SMS notification when you’re about to exceed your credit limit.
Impose a hard limit on your credit card account
If you have a provider that allows you to spend over your credit limit, and you’re sick of incurring credit card overlimit fees, the simplest solution is to give your lender a call and let them know that you want to impose a ‘hard limit’ on your credit card account. This means that once you reach your credit limit, any transaction that would have taken you over limit will be declined.