When you charge more than your available credit limit, the credit card company won't let you slide for long. In addition to accumulating fees and interest, the account damages your credit score if left unpaid. If the credit card company feels it won't ever collect the debt, it will charge off the account. Creditors typically charge off accounts after 180 days of non-payment, however it could occur sooner.
When you go over your credit limit, the credit card company will assess an over-the-limit fee. According to Bankrate.com, fees are commonly $29 to $35 for exceeding your credit limit. In addition to the fee, interest continues to accumulate on the total balance. You won't be able to use your card until you bring it below the limit. If you continuously go over the limit, the credit card issuer may lower your credit limit or raise your interest rate.
Contact From the Creditor
Your credit card company may send you a notice or contact you over the phone. The over-the-limit balance and any missed payments begin appearing on your credit report once the credit company reports to the credit bureaus. Depending on when your credit card company submits the information and when you surpassed the limit, it can take 30 to 60 days for it to appear on your credit report.
Turning it Over to Collections
Before writing off your account, the credit card company makes an effort to settle the debt. In most cases, the company's in-house collection department will handle the collection activity. Since the credit card company wants to recover the money you owe, it's typically willing to work with you. If you can't make the entire payment at once, it may accept a partial payment or agree to waive some of the late fees and penalties. As time goes on, the credit card company may become more willing to negotiate. However, your credit report will continue to reflect the missed payments and increasing balance.
Charging Off the Debt
If you don't pay your credit card at all, the credit card company will eventually write off the account as a bad debt. Creditors often sell charge-offs to third-party debt collectors. You won't receive a notice informing you the account is charged off, but expect future communication from the new debt collector. A charge-off doesn't mean you are off the hook. You're still legally obligated to repay the debt. If you don't pay the debt, the charge-off can remain on your credit report for seven years.
- Bankrate.com: When You Go Over the Limit
- Nolo: What to Expect When Your Debt Goes to Collection
- Experian: Charged Off Debt Must Still Be Repaid
- MyFICO: What Are the Different Categories of Late Payments and How Does Your FICO Score Consider Late Payments?
- Experian. "What Is a Credit Utilization Rate?" Accessed Aug. 9, 2020.
Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.