| Avoid Over Limit Fees |
| By Credit Federal |
Published
07/4/2008
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Credit Card
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Credit Card Maximum Charge Limits Reduced by Some Card Companies
Most standard credit cards have a maximum credit limit (the maximum amount you can charge without facing a penalty). Though creditors designate a maximum credit limit for charges, they'll allow you to charge beyond that amount but will charge you a fee when you do.
Exceeding your credit limit can be more costly than you think.
Of course your creditor will likely charge you an over-the-limit fee every month until you get your balance back below the credit limit.
Your interest rate can increase to the card's default rate, which in some cases is as high as 31%. This increased interest rate makes it more costly to carry a credit card balance beyond the grace period.
And your credit score is decreased. 30% of your credit score compares your debt level to your credit limits, so having an over-the-limit balance will lower your credit score.
Here are some ways to avoid the costs of going over your credit limit.
Know your credit limit so you'll know how much you can charge, and add to your current balance. If you can't find your limit on your credit card statement, contact the issuer. Since issuers are changing credit limits; both up and down, you may want to check your current credit limit on a monthly basis.
Don't expect your credit card issuer to stop you from over-charging (charging beyond your credit limit). Remember: Your creditor will allow you to exceed your limit because they make money when you do.
Enroll in balance alerts. Some credit card issuers will send alerts to cardholders when their balance is within a certain percentage or dollar amount of their credit limit. If your credit card offers this type of alert, sign up for it.
Keep your balance low. A low balance gives you room to make purchases without going over your limit. Not only that, it's better for your credit score. A good credit card balance is 30% of your credit limit or lower. That's a balance of $300 or less per $1,000 of credit limit.
Beware of advanced reservations and bookings. If; for example, you book a motel room 10 days in advance, the motel may go ahead on place a hold on your card for the total amount of your future stay. This is to ensure the motel will be paid (by making sure you have enough available funds on your credit card). These hold charges; although not actually charged yet against your card balance, could push you over your max limit if you are not careful.
If you're not sure, check. Anytime you're unaware of your balance and credit limit, check before making a purchase. Many credit cards have an automated line available 24/7 for checking this type of information. Use the customer service number on the back of the credit card. If you have a cell phone, you can even call from the store before making your purchase.
Need a credit card with a higher credit limit? Browse platinum credit card offers.
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