how an over limit fee works
over limit fees are one of the ways that credit card companies seek to manage their risks since credit cards are an unsecured form of debt credit card companies do not have recourse to any collateral if the cardholder defaults for this reason credit card companies seek to discourage customers from engaging in financially risky behaviors such as spending more than their prescribed credit limit by charging an over limit fee in response to such transactions credit card companies can disincentivize this behavior while also generating additional revenues in the past many credit card companies would automatically enroll customers into programs whereby they could exceed their credit limits and trigger an over limit fee however the passage of the card act in 2009 added new regulations to this process today customers are unable to exceed their credit limits unless they manually opt in to do so 1 paying off your entire credit card balance every month is the most cost effective strategy that avoids not only over limit fees but also high interest rate charges in other words credit card customers can choose to subject themselves to potential over limit fees in exchange for the right to exceed their credit limits at the same time however the card act also imposed limits on the size of the over limit fees themselves today credit card companies are restricted from charging fees greater than the amount by which the customer exceeded their credit limit for example if a customer exceeds their credit limit by 50 then 50 would be the maximum over limit fee permitted by law managing over limit fees