How do credit limits actually work?

Anonymous · ‎03-27-2015

I mean, say your limit is $1000. Will the card not allow you to spend more than that amount? Or will it allow you but you get some big heavy penalty or something. Say you try to charge even $1100 on a $1000 limit card but plan to pay before it posts. Would they even allow the purchase? P.s. I do not use anywhere close to my limit at all. I was just wondering about it in general.

ksantangelo23 · ‎03-27-2015

You'd be charged an over-limit fee, if that is in your agreement. Whether or not your agreement includes an over-limit fee, the approval for a purchase of $1100 on a $1000 card would be determined the moment you swipe, either approving or denying. EDIT: Based on your credit, spending patterns, etc

Same would go for if you were sitting with a $1000/$1000 balance, and attempted to charge 1 more dollar.

It wouldnt matter what your intentions of paying it off right away were

TU: 818 EX: 809 EQ: 801

longtimelurker · ‎03-27-2015

@ksantangelo23 wrote:
You'd be charged an over-limit fee, if that is in your agreement. Whether or not your agreement includes an over-limit fee, the approval for a purchase of $1100 on a $1000 card would be determined the moment you swipe, either approving or denying. EDIT: Based on your credit, spending patterns, etc

Same would go for if you were sitting with a $1000/$1000 balance, and attempted to charge 1 more dollar.

It wouldnt matter what your intentions of paying it off right away were

Following the CARD Act, over-the-limit fees have more or less disappeared. Now a user has to opt in to be charged them, and many of us have never been asked to do this (used to be a major revenue stream).

If you have a flexible spending card (Visa Sig, WMC, WEMC) you can usually charge over the limit, you will need to pay the excess (plus minimum payment) at the next statement.

With a normal card, they still can approve charges over the limit, but can't charge a fee unless you have opted in, so they probably won't approve the charge.

takeshi74 · ‎03-27-2015

@Anonymous wrote:
P.s. I do not use anywhere close to my limit at all. I was just wondering about it in general.

Be sure to read up on reported utilization and its impact on scoring and risk assessment as well. In short, you can use up to your limit (or more in some cases) but you don't want a balance that high to report.