An over-limit fee is a penalty charged by credit card companies when cardholders’ purchases exceed their credit limit. Previously, credit card companies would decline the transaction, but since the passing of the CARD Act, over-limit fees have virtually disappeared. However, if you opted into over-limit protection, your charge might go through, but you could get hit with fees, higher interest rates, or lower credit limits. If you make too many over-limit charges, your credit card issuer could close your credit account. The Credit CARD Act of 2009 limited the amount and types of fees that could be charged for an over-limit transaction. For instance, credit card issuers are only allowed to charge over-limit fees to cardholders who have opted in to over-limit protection plans. If you did not sign up for over-limit protection, you won’t be charged any over-limit fees, but you also won’t be able to spend over your credit card limit. The Credit CARD Act also limited credit issuers to one over-limit fee per billing cycle and restricted the amount that issuers could charge in fees. However, card issuers are not allowed to charge an over-limit fee that is greater than the amount charged over the limit. If you exceed your credit limit by $10, for example, your over-limit fee can be no higher than $10.

In summary, an over-limit fee is a penalty charged by credit card companies when cardholders’ purchases exceed their credit limit. The fee can be charged only if the cardholder has opted in to over-limit protection plans, and the amount charged cannot be greater than the amount charged over the limit. The Credit CARD Act of 2009 has limited the amount and types of fees that could be charged for an over-limit transaction.