An over-the-limit fee is charged when you exceed your credit limit through purchases, fees, or finance charges. The fee usually only applies to revolving credit which usually have a credit limit. Over-the-limit fees can be tough to get rid of, especially when you make the minimum payment after exceeding your credit limit. That's because the minimum payment will decrease your balance just below the credit limit leaving no room for the finance charge that's coming later in the billing cycle.
The Law on Over-the-Limit Fees
Federal law prohibits credit card issuers from charging you an over-the-limit fee unless you've opted-in to have over-the-limit transactions processed. Otherwise, any transaction that would exceed your credit limit will be declined allowing you to avoid the over-limit fee.
If you have opted-in to have over-the-limit transactions processed and you exceed your credit limit, you can only be charged an over-the-limit fee for two consecutive billing cycles if your balance remains over the limit. However, if you pay your balance down and it goes over the limit again or if you get a credit limit increase and exceed the new credit limit, your credit card issuer can charge another over-the-limit fee.
How Much is the Over-the-Limit Fee
Many credit card issuers have gotten rid of over-the-limit fees, so you won't receive a penalty for going over your credit limit. The fee varies by credit card issuers for those that do still charge it. Check your credit card agreement or the back of your credit card billing statement to find out the over-the-limit fee for your credit card.