A:

The difference between available credit and credit limit is closely tied to the account balance of a debt. Credit limit is the total amount of credit available to a borrower, including any amount already borrowed. Available credit is the difference between the credit limit and the account balance – how much you have left to spend, in other words.

Most credit card companies allow borrowers to increase account balances just beyond credit limits, provided that borrowers agree in writing. This sometimes is a result of charges and sometimes a result of interest and fees. Most credit card companies charge stiff penalties for accounts with balances above the credit limit – again, provided the borrower agrees to this in writing. In times of need, consumers may be tempted to sign any document that gives them access to needed cash.

The Consumer Financial Protection Bureau mandates amounts that credit card companies are allowed to charge for credit card accounts over the credit limit. The first time a balance exceeds a given credit limit, a charge of up to $25 may be applied. The second time a balance exceeds the credit limit within a six-month period, a charge of up to $35 may be applied. The charge applied may not exceed the amount the account is over the limit.

Individuals who have agreed to accept fees for exceeding credit limits have the right to change this at any time by notifying the lender in writing. This does not apply to transactions made before opting out of over-limit fees. Also, the lender is more likely to refuse transactions that take an account over the credit limit after a borrower has opted out.

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