Over Credit Limit Definition

Nearly every loan will have a fixed credit limit, which represents the maximum amount that a financial institution will loan to a borrower. Because all financial transactions do not record immediately, however, it is possible for a borrower to borrow more money than has been approved. For example, it is possible to use a credit card to charge many amounts in a short period of time such that the aggregate amount charged exceeds the agreed-upon credit limit. When the account balance exceeds the credit limit for any reason, an over credit limit situation exists. Accounts over the credit limit are usually charged an over limit fee at the end of each billing cycle-which may cause the account to exceed the credit limit even more. Additionally, over credit limit accounts are reported on the account bearer’s credit history.