Money Saving Tips

What happens if i go over my credit card limit?

what happens if i go over my credit card limit
Written by Richard Thwaite

Can you go over your credit card limit?

limit “a point or level beyond which something does not or may not extend or pass”

I pride myself in being very careful where my finances are concerned. I have spreadsheets galore, always check my receipts, collate them and verify every transaction. Being human, I make mistakes and I want to share my most recent one with you in a hope that you don’t fall into the same trap I did.

I have held a credit card for many years and try and buy everything I can on it. I always make a point of fully paying it off every month so that I avoid any interest charges. Doing so offers me purchase protection (which I have used twice) but my main reason is the rewards and offers available. I have a Tesco credit card and have enjoyed many years getting their Clubcard points which I tend to save up and use to pay for Christmas.

I want to point out at this stage that I only ever buy things with the card that I would normally buy such as food, petrol, insurance etc. In all the time I’ve had the card I have never missed a payment and never paid a penny in interest or other charges.

The only niggle I have ever had with Tesco was the credit limit. They kept raising it even though I asked them to bring it back down again. They thought I was mad when I told them that I didn’t want or need a £20k limit. After a while the limit settled at £4,500 which is far too high for regular use but I decided to accept it. My typical monthly credit card bill is around £500 which is always paid in full and on time.

My main reason for not wanting a high limit, other than I never spend that much money on anything, was in case my card was stolen or it was used fraudulently.  I realise that Tesco would pay the money back if the card was used fraudulently (as long as I was not negligent) however, having £4,500 instead of £20,000 at risk felt much better to me. I must say that Tesco are very diligent in contacting me if they have any concerns over spending patterns.

Yes you can go over your credit card limit

All was well in my credit card world until a couple of weeks ago. I am in the process of building a new kitchen and had selected all the various parts that I required including all the appliances such as oven, fridge, freezer, dishwasher etc. I went into the store to place the order and pay for all the items knowing that the total was £4,391. I debated whether to transfer the money from our savings into our current account so I could pay on my debit card but decided to do that in the shop should I have to as I would prefer to pay on my credit card as long as there were not any charges. Here is where I made my first mistake. I never checked my credit card balance but assumed that as I had a £4,500 limit, the card would be declined if it was exceeded. This to me was a logical conclusion and also backed up by the definition of the word limit in the dictionary “a point or level beyond which something does not or may not extend or pass”. I would then pay for most of it by credit card and the remainder by debit card to take advantage of the points available.

So, at the store, I typed in my pin number and a couple of seconds later the transaction was approved and completed. Happy days! I was 548 Clubcard points better off which equates to £5.48 (sadly Tesco has reduced it’s reward structure and so I’m looking at other credit cards) which may not be much but as I was buying the kitchen appliances already I may as well have the points as not.

The next day I thought I’d check my credit card account using the online facility as I knew I must be close to my limit and would transfer some money over to pay it down a bit as I needed some diesel in the coming days and did not want my credit card to get declined at the pumps.

Every little helps

When I logged into my account I saw to my horror that I was £57 over my limit and that there had been a £12 charge applied to my account for exceeding my credit limit. I immediately picked up the phone to Tesco and was told that a credit card has two limits – a credit limit and a declined limit. Once you are over the credit limit the £12 charge is applied and after 28 days you are liable to interest if you are still over the limit. You can keep spending until you hit your declined limit (I never found out what this limit is for me). I must say that the person from Tesco I spoke to was very helpful (as they always are – gold stars all round for the customer service team) and explained things to me.

Even though the terms of the credit limit are clearly written in the policy documents and it is my mistake, I feel it is very misleading. I asked Tesco if they could stop my spending if it hits the credit limit and they said they cannot do that. They did however refunded me the £12. I also made a payment to bring the balance back down below my credit limit to avoid the interest being applied.

What happens if i go over my credit card limit

I received two separate letters from Tesco. One explaining that I was £57 over my limit and a second one shown above.

Tesco are not alone

I have subsequently done some research online and found that this is very common across the majority of credit card companies. The figures quoted online for the money made by the credit card companies for this practice varied quite a bit, but nonetheless it is fair to say that they are making millions each year from people who succumb to this.

Some credit card providers don’t write to tell you about the charge, they simply add it to your account as a transaction and it’s not always clear on your statement what it is depending, on how they list it, so it’s always worth verifying all your transactions before paying your monthly bill.

I do feel a bit of a muppet for getting into this situation, however, the whole point of my posts are to share the rough with the smooth in the hope that it is useful. I would be interested to hear what you think. Have you fallen foul of this? Did you even know about it?

Leave a Comment

4 Comments

  • Hi Richard,

    I hadn’t heard of this before – like you I would have assumed that if you reached your limit the card would simply be declined in store, so it’s good to know that this isn’t the case (just in case I’m ever in the position of breaching my limit). I must admit I’ve never asked the credit card company to reduce my limit and every so often I get a letter telling me it’s been increased. I think now I know there are charges if you broach the limit I’m inclined to leave the limit as it is. It’s reassuring to know that Tesco removed the £12 charge for you, that is good customer service.

    I use the American Express Platinum cash back credit card which has no annual fee and provides anything from 0.5-1.5% cash back depending on how much you’ve spent on it during the year. I have a direct debit set-up to pay it off in full every month. I am very attached to the card as I find their customer service and the offers they provide really good. Let me know if you want a referral! 😉

    The only downside with the American Express card is that not everywhere accepts Amex. So I also have a Barclaycard Visa cashback credit card to use as a back-up, again with no annual fee and a cash back rate of 0.5%.

    • Hello OR

      I have to be honest I was very embarrassed and a little annoyed with what I did but thought I would share it anyway in the hope of helping others.

      Tesco customer services were very good and I can’t complain with the way they handled it. Tesco recently cut the points you can earn when you spend on your credit card. I have been looking at alternatives and saw the Amex card but was put off by past experience of one.

      It was maybe 10 years ago that I had an Amex and found that I could rarely use it as not many places would accept them. I would imagine that things have improved but would be interested to hear what % of places you find accept it.

      The cashback equivalent for my Tesco card is 0.13% now the points system has changed. Just this simple comparison makes the Amex look very appealing, as long as there are plenty of places to use it.

      Thanks

      Richard

  • Hi Richard

    Thanks for sharing this – I know full well that cards do not get declined if you go over the limit by a bit. During my bad old days of being in debt, I went over my credit card limits several times (sometimes by just a few quid) and was charged for it. Am fairly certain the charges were >£20 back then, when ‘being fair to the customer’ didn’t exist! When I finally paid off my credit cards, one thing I noticed was that several of them immediately upped my credit limits without me asking for the increase. Rather than contact them to reduce the limits, I just cut up the cards.

    These days, my main card is a Lloyds Duo Avios Amex, which allows me to collect Avios Airmiles. Every few years, I collect enough airmiles for a return flight to Hong Kong. It’s true that not all places accept Amex, but many more do these days, most importantly Tesco for my groceries and petrol. I pay it off in full every month. Incidentally, all my Tesco points get converted into Avios Airmiles too.

    I have two back up cards (Visa and Mastercard), both of which I periodically use as they almost always have 0% balance transfer offers, which I’ve used in the past to cover ’emergencies’. Now that I’m building up my emergency fund, I shouldn’t need to use these for this purpose. I should really check their limits though, to ensure they’re not something ridiculously high, so thanks for reminding me!

    • Hello Weenie

      It is clear from both yours and OR’s comments that I need to take a look at Amex again. I will do a bit of research and see what comes up.

      Thanks for your comment it is appreciated.

      Richard