What Is an Over-the-Limit Fee?

Over-the-limit fees are charges that your credit card issuer may apply to your account if your balance goes over your credit limit. These fees aren’t as common today as they were before the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), which limits how much and what kinds of fees credit card companies can charge.

Let’s understand what over-the-limit fees are, how they work, when your credit card issuer can charge them and how to reverse or avoid them.

Over-the-limit fee definition and how it works

When you’re approved for a credit card, you generally receive a credit limit, or a maximum amount you can charge on the card. An over-the-limit fee is what your credit card issuer charges you when you make a purchase that pushes your balance over your card’s credit limit.

It’s important to note that your credit card issuer can only charge the fee if you opt in to allow over-the-limit transactions; otherwise, the transaction will be declined. The fee only applies to purchases, not interest charges or late fees that push your balance over the limit.

In terms of how high over-the-limit fees can go, you can typically expect:

• A fee up to $25 for the first time you go over your limit
• A fee up to $35 when going over your limit a second time within a 6-month period
• In all circumstances, the fee is capped at the amount you went over your credit limit

Credit card issuer requirements for over-the-limit fees

Your credit card issuer must meet these conditions to charge you an over-the-limit fee:

• The credit card issuer’s policy must include an over-the-limit fee
• You must receive a clear notice explaining the fee policy and how much the fees could be
• You must opt in to allow over-the-limit transactions after seeing that notice
• The credit card issuer must confirm that you gave permission to make over-the-limit transactions
• A transaction — not fees or interest charges — must cause your balance to go over the limit

Rules about timing also apply. Your credit card issuer can only charge a fee tied to the same over-the-limit transaction for up to 3 consecutive billing cycles, and only if your balance stays over the limit for that amount of time. They can charge a new fee in the fourth cycle, but only if you made a new over-the-limit transaction during the second or third cycle. That fee in turn may be charged for up to 3 consecutive billing cycles if the new over-the-limit transaction keeps you over your credit limit. If you don’t pay down your balance, these fees can add up quickly.

Are over-the-limit fees still common?

Over-the-limit fees aren’t as common as they once were. After Congress passed the CARD Act in 2009, credit card issuers had to cap certain fees, notify you of over-the-limit fee policies and get your permission before allowing you to exceed your limit. But while the CARD Act helped reduce over-the-limit fees, credit card companies can still charge them if they follow all the rules.

Are over-the-limit fee reversals possible?

Over-the-limit fee reversals are possible, but usually only in specific situations. Your credit card issuer may reverse the fee if:

• They see that the amount you went over your limit was very small
• They charged you an over-the-limit fee after you opted out of over-the-limit transactions
• They confused interest or late charges with an over-the-limit transaction
• They made another error when charging you

Whether any of these scenarios apply to you, contacting your credit card issuer to understand their reversal policy can help you find solutions if they ever charge you an over-the-limit fee.

How to avoid over-the-limit fees

You may take a few simple steps to reduce the chances of going over your credit limit and triggering a fee.

Opt out of over-limit transactions and fees

Because of the CARD Act, you can simply refuse to opt in to over-the-limit transactions and the associated fees. You can also withdraw your consent to be charged those fees at any time.

Monitoring your balance

When monitoring your account balances each month, you might:

• Spot charges you don’t recognize
• Notice fees that may be errors
• Catch an upcoming recurring subscription charge that could push your balance over the limit

In those cases, you can take preventative steps, contact your credit card issuer to initiate a reversal or adjust the payment options for your different subscriptions.

Setting up alerts for low available credit

If monitoring your balances takes up too much time, you may be able to enroll in low-available-credit alerts. If your credit card issuer provides an alert feature on its mobile app or online, you can be notified when you’re close to your limit. Near-limit alerts may remind you to make a payment sooner or wait to spend until after you pay.

Pay off your balance before large purchases

Paying off your full statement balance before making a large purchase is another way to avoid over-the-limit fees. When you pay off your balance, it frees up available credit, so you may be less likely to exceed your limit. It can also help minimize interest charges on revolving balances and decrease your credit utilization ratio.

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.