Over-Limit Fee: What it Is and How It Works Key takeaways
An over-limit fee is a penalty a credit card issuer may charge when your balance exceeds your credit limit.
Federal rules require cardholders to opt in before issuers allow transactions that exceed the limit and to cap the size and frequency of over-limit fees.
* Over-limit fees have become rare; better strategies are monitoring balances and paying cards in full to avoid fees and interest. What is an over-limit fee? An over-limit fee is charged when a credit card balance goes above the card’s assigned credit limit. Historically issuers sometimes allowed transactions to post and charged a fee; today, federal regulation requires consumer consent before an issuer can permit and charge for an over-limit transaction. Explore More Resources
How over-limit fees work Credit card debt is unsecured, so issuers use credit limits and fees to manage risk. If you opt in to allow over-limit transactions, the issuer may:
Let a purchase that exceeds your limit post, and
Charge an over-limit fee (subject to regulatory limits). If you do not opt in, most issuers will decline a transaction that would put you over your limit. If an issuer allows an over-limit transaction without your opt-in, you generally cannot be charged an over-limit fee for that transaction—contact the issuer to dispute any fee. Explore More Resources
Regulatory changes (CARD Act) The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act changed how over-limit fees are handled:
Cardholders must opt in before an issuer can allow transactions above the credit limit.
Issuers cannot charge an over-limit fee larger than the amount by which the limit was exceeded.
* Rules limit how often and how much can be charged for over-limit fees in a given period. How much can an over-limit fee be? Regulations cap fees relative to the overage and restrict frequency. Historically published limits (for example, one early-fee cap and a higher cap for a second fee within six months) have applied, but many issuers stopped charging over-limit fees after the CARD Act. Some major issuers no longer assess these fees at all. Explore More Resources
Other consequences of exceeding your limit Even if an over-limit fee is rare, repeatedly going over your limit can lead to other penalties:
Higher interest rates
Reduced credit limit
Higher minimum payments or earlier due dates
Possible account suspension or cancellation
* Negative effects on your credit utilization and credit score How to manage and avoid over-limit fees
* Don’t opt in to over-limit coverage if you want transactions declined rather than fees charged.
* Monitor your balance regularly and set balance or payment alerts.
* Pay your statement in full each month to avoid fees and interest.
* Consider automatic payments for at least the minimum due.
* Ask for a credit limit increase if your income and credit history support it.
* If you see an over-limit fee you believe is incorrect, contact your issuer promptly to dispute it.
Bottom line Over-limit fees were once common but are now uncommon due to federal protections requiring opt-in and fee limits. The most reliable way to avoid them—and other penalties—is to track balances and pay cards on time, ideally in full each month. Explore More Resources