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Can You Overdraft a Credit Card?

Last Updated: June 13, 2024

5 min read

Key Points:

Some credit card issuers may let you exceed your credit limit if you authorize over-limit transactions and agree to pay an overdraft fee.
If you go over your credit limit due to interest charges you won’t incur a fee.
When you use all your credit limit (or exceed it) it may hurt your credit score.

An overdraft means that you’ve spent more money than the available balance in your bank account. When you exceed your credit card limit, it’s called an over-limit transaction or going over-the-limit.

What is a bank overdraft?

An overdraft is most often associated with a bank or credit union checking account or debit card. If you write a check for more than you have in the account, a bank will normally return the check for insufficient funds (commonly called bouncing a check).

If you have overdraft services and your account balance dips below zero, the bank can extend temporary credit for the shortfall and pay the check or debit card charge. An overdraft transaction usually incurs a fee (overdraft fees average around $35 and could be charged each day you are overdrawn according to the FDIC).

What happens when you go over your credit card limit?

In contrast to a bank overdraft, with credit cards you're spending credit, not cash. Your card issuer specifies a credit limit and will decline transactions that would put you over that limit.

Some of the best credit cards will let you go over your credit limit if you opt-in and agree to applicable fees (like an over-the-limit fee). In fact, cards like Discover may allow you to go over your limit without paying an over-limit fee. It’s important to note that while you may be able to go over your limit, the best practice is to avoid doing so. It may be a signal to creditors that you are having difficulty managing your finances.

Look closely at the terms and conditions of your card—some cards may allow certain over-the-limit transactions based on your history with them or the amount of the transaction. Be aware that in these cases it may be difficult to know how much you’re allowed to spend over your limit.

According to federal law , your card issuer can’t charge an over-the-limit fee if you go over your limit only due to interest charges.

If you opt in to pay over-the-limit charges, your card issuer may have strict policies about these transactions. As an example, they may require you to pay back the over-limit amount immediately. They may also decline further transactions on a card that’s at or over the credit limit.

It’s also good to know that even if you initially agreed to over-the-limit transactions and fees, you may always opt out later. When you opt out, it means the card issuer will go back to declining new transactions that would put you over your limit.

How exceeding your credit limit affects your credit score

While fees are a major downside of over-the-limit transactions, there are other aspects to consider. One consequence is the impact on your credit score. Going over your credit limit or maxing out your card may raise your credit utilization to a point that impacts your credit.

Credit utilization is the percentage of credit you’re currently using out of the total credit available to you. For instance, if your credit limit is $1,000 and your card balance is $300, you’re using 30% of your available credit for that card. If you use $1,000 or more on that same card, then your credit utilization is 100% or more.

Credit utilization accounts for 30% of your total credit score. So, exceeding your credit limit is likely to negatively impact your credit score.

Did you know?

If you're close to your credit card limit and feel stuck, a balance transfer offer could help. Look for a 0% intro APR balance transfer offer from issuers such as Discover. If you qualify, you may be able to lower your interest rate on your existing balance, which can make paying off your balance easier.

Learn More

Alternatives to going over a credit card limit

If you find yourself relying on your credit card’s over-limit feature, it may be time to consider alternatives. There may be other ways to access the credit you need.

Request a credit limit increase: If you have a good credit score, a positive payment history, or have recently seen an increase in income, you may qualify for a credit increase. A higher credit limit can help improve credit utilization, too.
To increase the credit limit on your Discover Card, call the number on your credit card, or visit the Discover Account Center, select “Card Services” and then “Credit Line Increase.” You can also request a credit limit increase through the Discover Mobile App.
Apply for a new credit card: Another way to increase your available credit is by adding a new credit card account. If you have a good credit score, you may qualify for additional credit. In this case, look for a new credit card that offers better benefits than your current card or a low-rate balance transfer offer.
Take out a personal loan: Personal loans generally have lower interest rates than credit cards, but you may need good credit for approval. You can use a personal loan to consolidate your credit card debt in one place with one payment. It is best to check with the loan provider what types of debt you can consolidate.
Apply for a home equity loan: If you have equity in your home, you may want to consider applying for a home equity loan, which may have lower interest rates and less strict credit requirements. Like a personal loan, a home equity loan can help you consolidate debt, lower your total monthly payments, and even save on interest.

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