Are you afraid of what might happen if you exceed your credit card limit? Perhaps this is one of the reasons why you have not yet surrendered to this payment method. Keep track of what happens if you exceed your card ceiling and learn what you can do if you find yourself in this situation.
What is the credit card limit?
When purchasing a credit card, the financial institution stipulates a ceiling, ie a maximum amount available to the customer to spend monthly, which defines the credit card limit.
The value of the ceiling is renewed whenever the debt is paid off. Imagine you have a ceiling of 500 dollars, but you have already used 200 dollars to make purchases for the month.
You only have 300 dollars left to use, which you can use until you finish. However, since paying 200 dollars already spent reverts to the ceiling 500 dollars available.
Why are there different ceiling lights?
The credit card limit is set by the financial institution taking into consideration the consumer’s income and other factors such as whether he is an exemplary debtor who pays all installments on time.
If your request for a credit card is approved, the credit limit available for the bank may be higher or lower. It will be the financial institution that decides this.
If you wish to extend your ceiling at any time, you can call your bank and request a re-evaluation.
However, note that it is a recurring practice for financial institutions to ask for proof that they are a good borrower (in order to be responsible for monthly payments) to accept a request to raise the credit card limit.
But what happens if I exceed the credit card limit?
In many cases, if you exceed the credit card limit, the financial institution declines the payment transaction. However, some institutions allow the transaction to be completed even when it has already exceeded the ceiling.
To avoid unpleasantness and to face a debt far above what you were expecting, you should confirm with your bank how the contract was made and whether or not it allows transactions to continue after reaching the upper limit. and the interest rates charged if you exceed this limit.
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If you have exceeded your credit card limit, we recommend that you take the following steps:
1. Check payment methods and payment terms
As a rule, exceeding your credit card ceiling will incur interest. However, some banks give you an interest-free repayment term, so try to find out what the term is and if it is no longer over.
If you are still within the interest-free payment period, and if this is a fully payable amount, consider this option. This avoids the addition of fees and only pays the amount you owe the institution without additional costs.
If you only realize the situation after the interest-free repayment period has passed, try to find out from the bank whether you can split the monthly payment and how long you can do it.
You will always have to pay interest, but if you pay it off, the debt may not weigh heavily on your budget.
2. Evaluate the impact of the new installment
Exceeding your credit card limit may reflect a new monthly installment if you decide to pay in installments the amount you left in debt.
It is important to evaluate the impact this new benefit will have on your life as it represents another burden at the end of the month that can affect your stress rate.
If you do not have any other debts, this installment can be easily managed with the remaining day to day expenses.
If you currently have other debts and find that the new installment is affecting your effort rate, you may want to think about consolidating credits and merging all the installments into one so as to ease the burden at the end of the month.
3. Plan your monthly expenses
In order for the debt to exceed the credit card limit to have the least possible impact, it is important that you plan your expenses. Analyze your current expenses and realize what expenses you can save on.
For example, listing your monthly purchases and expenses in advance can help you avoid potential unnecessary spending and help keep your finances balanced.
4. Turn debt into learning
A debt situation can represent a distressing time in your life. However, take learning from this lesson to become more financially responsible and better manage the amount you have on your credit card.
We believe such a situation helps to better understand how credit cards work and encourages you to act more cautiously when using them.