Exceeding your credit limit can result in transaction denial, high fees, a drop in credit score, and even closure of your account.
When you use your credit card for a purchase that exceeds your credit limit, the transaction will be declined.
If you have opted into over-limit protection, your charge might be approved, but you will be charged an over-limit fee.
The first time you exceed your credit limit, the penalty cap is $25, and the second time, it goes up to $35.
Exceeding your credit limit can also damage your credit score by increasing your credit utilization ratio.
Credit utilization is the ratio of your credit card balances to your credit limits. It accounts for 20% of your credit score.
If your balance is over the limit when it's reported to the credit bureaus, it could cause your score to drop.
To avoid exceeding your limit, keep track of your spending and available credit, and try not to exceed your limit.
If you regularly max out your credit card, you face higher interest rates, higher minimum payments, and a lower credit limit.