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How common is it to go over your credit card limit and what happens when you do?*

I am a college student who just got my first credit card. When I got the card; I swore to only make purchases on the card that I can pay off in full every month. I paid the first monthy balance in full, but the bank took longer than I expected to process the online payment and it arrived late. I was charged a late fee (which is understandable) and I was just prepared to pay the balance off in full the next month. Well, I had some unforseen expenses come up (like medications and other needed items), so I realized that I would not be able to pay in full this month. Which was ok, until I realized that I had exceeded my credit limit by accident. I just realized it yesterday and I paniced. My question is what happens now and am I the only one who this has happened to? Looking ahead, I know that I can pay off the card fully within the next three months or sooner if I have to. I only went over my limit of $300 by $26, so how badly will this all hurt my credit score and affect my card?

Answers:

1) Nothing happens. On your credit reports it will show your high balance and it will exceed your credit limit. But the bank is really happy to get that $30 late payment fee. Always pay cards in full the day you get them in the mail for top credit. One trick - after 6 months of being on time and paying in full, ask to have your credit limit increased. That way your high balance will be lower than your credit limit. Any time you use more than 25% of your limit, it lowers your score. The fico is a mistery - so I won't even guess how many points. Note: get another card. Every good card user (which you want to be) should have an extra card in case something goes wrong with the first one. /

2) You'll be assessed an over limit fee and having your card maxed out affects your credit utilization ratio. That in turn, affects your credit score. (Ideally, you should keep credit utilization at 30 to 50 %...30 % is better). A late payment will be reported as well. You really need to become more vigilant about these things because they add up and before you know it, a good credit score becomes fair, a fair credit score becomes poor, etc. Also, some creditors report to the bureaus if a payment is 5 days late. If it took that long for your payment to process, you may have been reported as late.

3) Your card's $300 credit limit makes this card a beginner card. Do yourself a big favor. Don't even consider this a real credit card. Keep it at home and use it once a month for $30 maximum. That way you stay within the recommended 10% of your credit limit. You are desperately looking for a pat on the back... and that what happened is OK... It is not. Going over the Credit Limit is not a common thing to do for responsible people. Personally... I have never done it. Although easy to say when you have a credit limit that is in the thousands. But if you want to be taken serious by your lenders then you better shape up fast. Immediately make an online payment to bring the balance way below the credit limit. Generously add at least another $60 in fees to that balance of yours. That means you need to make a $100 payment now. When you get a bill.... make the payment within 10 days before due date. No excuses... and no, the bank didn't prolong the online payment... you made it too late. Otherwise it wouldn't be so "understandable" on your part. With a $300 credit limit you need to call your lender and ask them to remove the "overdraft protection" option. You can't afford it. That means once the card has reached it's limit.... the charges you are trying to make will be denied. While you are at it... do this with your bank too and remove the overdraft protection for your checking account. You can't afford to pay huge fees for the privilege to be able to overdraw your credit limit on your credit card or the account balance in your checking account. Those favors are not in your favor.... and a college student can't afford to waste money.

4) Your primary concern right now should be to get the card paid to below the credit limit immediately. Not just a minimum payment to bring the card down, but a large payment that will provide you cushion, so that once they add interest and fees to your next statement, that it will not cause you to go over the limit again! Next, if this is your first credit card, you are just now building a score, and being late by anything under 30 days will not reflect on your credit. Only account past due by thirty days will report. However the huge downside if you are late is it will cost you those hefty late fees. Do not give the credit card companies any money you do not have too. Do not be concerned about your score right now, concentrate on getting the card paid off and then learn from this situation, and not let it happen again. You now know that "life happens" and unexpected need for $$ will arise, you sound as if you know the correct way to take care of your finances, so just live and learn from this.

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