Can You Overdraft a Credit Card?

It’s not fun to discover that you have an overdraft on an account — meaning your balance is negative — especially if you have to pay an overdraft fee. This concept generally applies to bank accounts, but you may be wondering if you can overdraft a credit card.

When it comes to credit cards, overdrafts are comparable to going over your credit card limit. That can have financial and credit repercussions, too.

Let’s explore when you might go over your credit limit and the potential consequences, as well as tips to avoid going over your credit limit.

Can you overdraft on a credit card?

A credit card comes with a credit limit, which is the maximum amount you may charge to the account. Credit limits can vary widely depending on your creditworthiness and income, as well as the credit card issuer’s policies. However, some credit card issuers may authorize transactions that exceed the credit limit.

Your credit card agreement or terms and conditions can help you understand your credit limit, whether you can exceed it and what happens if you do. You can always contact your issuer if you’re not sure how they handle over-limit charges.

What happens when you go over your credit limit?

There are a few potential consequences for going over your credit card’s limit, from fees and declined transactions to a higher minimum payment requirement and credit score dips.

Over-limit fees

Some credit card issuers may authorize over-limit transactions and charge an over-limit fee — but only if you’ve opted to allow over-limit transactions. This fee varies by credit card issuer, but it can’t be larger than the amount you charged over your credit limit.

Declined card

Your credit card issuer may not allow you to complete transactions that would result in going over your credit limit. In that case, your transaction would be declined due to insufficient funds.

This is especially common if you haven’t opted in to allow your card to exceed your credit limit.

Minimum payment increase

If your credit card issuer allows you to go over your credit limit, that transaction may be added to your minimum monthly payment requirement. Some issuers may even require you to immediately repay the over-limit amount.

Credit score drop

Going over your credit card limit may impact your credit. For example, it can increase your amount owed and credit utilization (the amount you owe compared to your total credit limit) which are 2 important credit scoring factors. This may translate to a decrease in your credit score. 

How to avoid going over your credit card limit

There are several ways you can avoid going over your credit card limit, from opting out of over-limit protections to requesting a credit limit increase.

Opt out of over-limits

If you previously opted in to allow your card to go over the limit, you can update your preferences to disallow over-limit transactions. That can help you avoid paying subsequent fees. You may need to contact your credit card issuer to set this up.

Keep in mind that this option won’t prevent your card from being declined if a transaction exceeds your credit limit.

Track your spending

Tracking your spending can help you ensure that your card usage stays within your credit limit. If you have multiple credit cards, you may want to note which credit card you’re using for each purchase so that you can track your balances more accurately.

Set up alerts

Credit card issuers may allow you to set up alerts, such as high-balance and over-limit alerts, to help you manage your account. Depending on the issuer, you may have the option to receive alerts via text message or email. These can help you take quick action to avoid going over your credit limit or make a payment to get your balance below the limit.

Request a credit limit increase

Another option to avoid going over your credit limit is to contact your credit card issuer and request a credit limit increase. This may be helpful if your spending often exceeds your credit limit and you don’t have difficulty repaying the amount. However, it’s important to take steps to avoid overspending if you go this route.

Keep in mind that a credit limit increase would be at your credit card issuer’s discretion and may result in a hard credit inquiry, which can have a small, temporary impact on your credit.

Credit cards can be a powerful tool, providing a convenient way to spend money while building credit. It’s important to use this tool responsibly, including taking steps to ensure you stay within your credit limit.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.