Can You Overdraft a Credit Card?

Published June 19, 2023

4 min read

Key points about: exceeding the credit limit on your credit card

Some credit card issuers may let you exceed your credit limit if you authorize over-limit transactions and agree to pay a fee.
Going over your credit limit due to interest charges won’t incur a fee.
Using all of your credit limit or exceeding it may hurt your credit score.

An overdraft means that you've spent more money than the available balance in your account, but your bank or credit union paid the difference. Some financial institutions may allow you to overdraft your bank account, although there may be fees or penalties associated with overdrafting.

When it comes to credit cards, your credit limit is usually the maximum you can spend. However, some credit cards may let you add a type of overdraft protection, which means you authorize over-limit fees, and your lender allows you to complete transactions that exceed your credit limit. Some cards, including Discover, may allow you to go over your limit without paying an over-limit fee.

What is an overdraft?

An overdraft is most often associated with a bank account such as a checking account. If you write a check for more than you have in the account, it would normally be returned for insufficient funds. If you have overdraft privileges, when the account balance dips below zero, the bank extends you credit for the shortfall and pays the check. An overdraft transaction usually incurs an overdraft fee.

With credit cards, you’re only using credit, so you can’t rely on overdraft protection. Your card issuer specifies a credit limit, and going over the limit on a credit card means you’re exceeding the credit limit your card issuer has set for your account. Some credit card issuers will let you go over your credit limit transactions if you opt-in and agree to any applicable fees, but credit cards don’t have overdraft protection as a built-in feature like some checking accounts do.

What happens if you exceed your credit limit?

While many credit card issuers will block card transactions that exceed the credit limit, some may process the transaction while also charging you an over-the-limit fee. You’ll have to look closely at the terms and conditions of your card to know where your credit card issuer lands – some may allow certain over-limit transactions based on the cardmember’s history with them or the amount of the transaction, but in such cases, it may be difficult to know how much you can spend over your limit.

As the Consumer Finance Protection Bureau explains, card issuers can only charge you an over-limit fee if you've opted for over-limit transactions and have agreed to pay over-the-limit charges. Even if you opt in, your card issuer may have strict policies about over-the-limit transactions. They may require you to pay back the deficit immediately and/or may decline further transactions on a card that’s at or over the credit limit. Remember that even if you initially agreed to over-the-limit transactions and fees, you may always opt out later. Your issuer also can’t charge an over-the-limit fee if you go over your limit only due to interest charges.

How does exceeding your credit limit affect your credit score?

While fees are a major downside of over-the-limit transactions, there are other aspects to consider, such as 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. So, if your credit limit is $1000 and your card balance is $300, you're using 30% of your available credit for that card. But if your balance is $1000 or more, then your credit utilization is 100% or more.

A high credit utilization rate could be bad for your credit score, so it's best to keep your credit utilization rate as low as possible. Credit utilization accounts for 30% of your credit score. So, exceeding your credit limit is likely to negatively impact your credit score. Apart from affecting your credit score, going over your credit limit could make your balance harder to pay off.

Did you know?

If you’re carrying high balances, you may want to work on paying down some of your debt so you don’t have to worry about going over your credit limit. It may be helpful to apply for a 0% intro APR balance transfer credit card from Discover. Lowering your interest rate temporarily can help you pay off your balances more easily.

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Alternatives to a credit card overdraft

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

Try increasing your credit limit: If you have a good credit score and positive payment history or have recently seen an increase in income, you may want to request a credit limit increase from your card issuer. 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.
Get overdraft protection for your checking account: Just as you can go over your credit limit, you can also use an overdraft on your checking account. But since overdraft fees are high, you may want to consider getting overdraft protection. Overdraft protection links your checking account to another bank account such as a savings account, so when you overcharge, the excess funds come from the linked account. Overdraft protection allows you to leverage a savings account for emergencies while avoiding overdraft fees. Overdraft protection is a paid service, but may cost less than multiple overdraft fees.
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, and you may also benefit by choosing a new credit card that offers better benefits than your current card.
Take out a personal loan: Personal loans generally have lower interest rates than credit cards, but you may need good credit to be approved.
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.

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