Definition

• Credit cards provide a certain amount of credit that is accessed with the card or account number for in-person and Internet purchases. The available funds are called the credit limit. Consumers use those funds and pay the money back in full or a little bit at a time. Credit card issuers send statements that explain the minimum amount that must be paid and a due date. The U.S. Department of the Treasury's Comptroller of the Currency explains that banks must deliver statements at least 21 days before the due date. Payments received after that date are considered delinquent.
  
  

Considerations

• Card holders sometimes try to make purchases that cost more than the available credit. Such purchases put them over their credit limit if the transaction goes through. The Credit Card Accountability Responsibility and Disclosure (CCARD) Act forbids credit card companies from allowing people to go over the limit unless they specifically give the companies permission to do so.
  
  

Effects

• Over limit purchases are separate from payments so they do not automatically cause delinquencies. Credit card companies are allowed to impose fees when someone goes over the limit, according to the Board of Governors of the Federal Reserve System. This additional cost, combined with a potentially greater minimum amount due, could cause the card holder to have trouble paying by the due date, which could result in a delinquency.
  
  

Warning

• Going over a credit limit and making delinquent payments both hurt a consumer's credit rating. Account information appears on the credit reports compiled by TransUnion, Equifax and Experian. These credit bureaus show the limits and current account balances, so lenders who review the reports can see if someone has exceeded the available credit on a particular credit card. Delinquent payments are also noted and pull down the score.
  
  

Prevention

• Consumers can easily prevent going over their credit limits by instructing their banks not to allow such transactions. The CCARD Act forces card issuers to honor this request, the Board of Governors of the Federal Reserve explains. Prevent delinquencies by sending payments well in advance of their due dates. Electronic payments ensure timely arrival. Erroneous late payments and incorrect account balances sometimes show up on credit reports, review your records every year and dispute the misreported items. Free credit reports are available through annualcreditreport.com, and the credit bureau websites all have dispute information pages.