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Can you overdraft a credit card?

Avoid overlimit fees and interest by opting out.

Generally, the answer is “no.” Most credit cards don’t allow you to “overdraw” on your account. If you try to make a purchase on your card and you don’t have funds, your purchase will be denied. However, some issuers will allow you to opt-in to this feature. Here’s why you shouldn’t do it.

What happens if my credit card is overdrawn?

Going over your credit limit can have unpleasant consequences that vary between cards and providers. Some of the common outcomes include:

  • Overlimit fees. Typically, your card provider may charge you an overlimit fee when you go beyond your credit card limit. This is often a flat fee for the statement period, although some lenders may impose the same fee for each transaction exceeding your limit. Following the 2009 credit card reforms, banks must disclose this fee in your contract and you have the right to opt out of the option to exceed your credit limit. Doing so will cause over-limit transactions to be declined.
  • Declined transactions. If you choose not to have the option to exceed your credit limit, your card will be declined if a transaction exceeds your credit limit. Any direct debits or automatic payments that come through during this time will also be declined, which may result in late payment fees by your service provider or cancellation of services.
  • Interest charges. Some cards deem you ineligible for interest-free days on purchases if you don’t repay your balance in full for two consecutive periods. This means your interest fees can be retroactively charged for the period and can mount up very quickly in the next period if you don’t repay your full balance for the current statement cycle.
  • Ongoing debt. Inadvertently, regularly maxing out your credit card spells ongoing debt if you’re not able to repay the full amount each month. Carrying an outstanding balance on your credit card can lead to heavy interest payments and create even greater debt.

How to deal with overdrawn credit card accounts

There are other options available apart from a balance transfer, including:

  • Making additional repayments. This can be an effective way of staying within your credit limit. By making repayments twice a month instead of monthly, or more often if necessary, you can successfully avoid maxing out your card and potentially avoid some interest.
  • Requesting a credit limit increase. You may be eligible for a higher credit limit if your credit score is good and you’ve had a healthy history of making regular repayments with this card provider. You can usually request a credit limit increase in your credit limit online or by contacting your provider over the phone.
  • Contacting your provider. It’s often a good move to call your credit card provider for a chat. If you explain your circumstances, they’re usually more than willing to discuss your options and offer possible solutions in order to keep your business.

Could a balance transfer help?

If you’ve overdrawn on your credit card account because of ongoing debt issues, it may be worthwhile to consider using a balance transfer credit card with a low or 0% introductory interest rate.

This can help you save on interest charges so that you can pay off your original debt sooner. Consider these possible balance transfer offers:

  • Short-term balance transfers. If you have a small debt which you can confidently repay in a short time, a short-term balance transfer should suffice. Short-term balance transfer offers typically come with a 0% intro APR on balance transfers for six months.
  • Long-term balance transfers. If your debt is going to take longer to chip away, consider balance transfers for a longer term. You can find long-term balance transfer offers with a 0% intro APR for 12, 15, 18 and even 21 months.
  • Balance transfer and purchase rate offers. If you plan to keep using the card for new purchases while paying off the balance transfer, consider getting a credit card with both a promotional balance transfer and purchase rate offer to help you effectively save on all interest. However, if you’re concentrating on paying down your debt, a card with a low purchase rate might not be a wise option.

Compare balance transfer credit cards

%
Name Product Amount saved Balance transfer APR Balance transfer fee Minimum Credit Score Filter values
Luxury Card Mastercard® Titanium Card™
0% intro for the first 15 billing cycles (then 14.99% variable)
$5 or 3% of the transaction, whichever is greater
670
Enjoy unique excursions, privileged access to exclusive events and insider opportunities.
Luxury Card Mastercard® Black Card™
0% intro for the first 15 billing cycles (then 14.99% variable)
$5 or 3% of the transaction, whichever is greater
670
Receive an annual $100 air travel credit toward flight-related purchases including airline tickets, baggage fees, upgrades and more.
Luxury Card Mastercard® Gold Card™
0% intro for the first 15 billing cycles (then 14.99% variable)
$5 or 3% of the transaction, whichever is greater
670
Earn 2% point value when redeemed for airfare or cash back through the Luxury rewards program.
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Compare up to 4 providers

Bottom line

Overdrawing an account is never fun, but there are several ways to recover. If you’re struggling with debt, a balance transfer may help provide the breathing room you need.

Scoring a card with 0% intro APR that has a high enough credit limit for you to transfer all of your credit card debt over to could be just what you need to get your finances under control. However, a long-term solution may involve seeking help for debt management.

Frequently asked questions

When will I have to opt out of overdraft protection?
Agree to opt-in or opt-out of this feature when finalizing and setting up your credit card account. Call your issuer or switch over your decision online if you change your mind.

How does going over my credit limit affect my credit score?
There are five main factors that determine your credit score, one of which is your credit utilization ratio. This ratio is calculated by dividing your balance on existing credit cards by your available credit limits.

If you maxed out your credit card, your credit utilization ratio would be at 100% for that card. This will have a negative impact on your credit report and will likely lower your score. To learn more, visit our guide to understanding your credit score.

How do I conduct a balance transfer with my current provider?
Usually, no. Most credit card companies won’t allow you to transfer your balance between accounts under the same issuer. However, check with your card provider for more information.

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