Know what to expect before putting this much on your credit card.
Credit cards are normally the best option to pay for purchases. Many of them offer rewards, such as cash back, as well as complimentary purchase protections. If you pay in full every month, it makes sense to use your credit cards for all your usual bills to take full advantage of those perks.
But what if you have a very large purchase planned, like something that's going to cost you over $10,000? You might already know that banks need to report cash deposits of $10,000 or more and want to see if there's anything to be aware of with credit cards.
If you have enough available credit for a purchase, then you can put it on your credit card. Your available credit is your credit limit minus your current balance. For example, if you want to make a $10,000 purchase, you'd need at least $10,000 in available credit. Before you do this, there are a few things you should know about.
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Large transactions can trigger a card issuer's fraud detection, especially if a transaction doesn't fit your normal spending habits. If most of your credit card purchases are under $100, and then you decide to spend $5,000 or $10,000, your card issuer might want to double check that it's you and not a scam artist.
If so, your card issuer will either:
- Reject the transaction and contact you to see if it's legitimate. If you confirm that you were trying to make the purchase, your card issuer will tell you that you'll need to attempt the purchase again so it goes through.
- Approve the transaction and contact you to let you know about it. In this case, the purchase goes through like normal, and your card issuer sends you a notification about it. The notification will include an option to report the purchase as fraud if you didn't make it.
Your card issuer could get in touch by phone, email, or SMS message. This will depend on what contact information it has for you and your communication preferences.
Your credit utilization will go up
Your credit card balances have a significant impact on your credit score. That means large transactions could cause your credit score to drop, at least until you've paid them down.
One of the most heavily weighted factors in your credit score is your amounts owed. These include balances on credit cards and loans, but balances from credit cards matter much more. Specifically, it's your credit utilization ratio which is very important. Credit utilization is your credit card balances divided by your credit limits. As a rule of thumb, it's good to keep this below 30%.
Let's say you have a credit card with a balance of $2,000 and a credit limit of $20,000. Your credit utilization would be $2,000 divided by $20,000, which is 10%, a great number for your credit score.
You then make a $12,000 purchase. Your balance is now $14,000, with the same $20,000 credit limit. That brings your credit utilization to 70%. A number that high could have a serious negative impact on your credit score. However, only your current credit utilization matters. Once you pay off your credit card, your credit score will go back to normal.
You run the risk of credit card debt
The biggest danger of spending a large amount on your credit card is that it could put you into debt. Because of the high interest rates most cards have, credit card debt is expensive and hard to get rid of.
A credit card interest calculator is a good way to see just how costly this can be. For example, if you have a $10,000 balance on your credit card and pay $300 per month, that balance would take 47 months to pay off. That's nearly four years! You'd also pay $3,967 in interest charges.
There are two situations where putting this type of spending on your credit card isn't going to cost you:
- You can pay the balance in full by the due date on your credit card statement. When you pay your credit card's full statement balance, you don't get charged interest.
- You're using a 0% intro APR credit card. This type of credit card has a 0% APR on purchases for an introductory period. If you're able to pay off your balance in full during that period, you'll avoid interest charges.
Assuming you have the credit, you can put more than $10,000 on your credit card without issue. Your card issuer may want to confirm the purchase isn't fraud, though. The potential consequences are damage to your credit score and credit card debt. That's why it's best to be careful how much you spend on your credit card and only charge purchases you can afford to pay in full.
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FAQs
You'll also have less available credit, and this amount of debt may hurt your credit score. A purchase of over $10,000 could trigger your card issuer's fraud detection.
What happens if you spend more than what's on your credit card? ›
Increased minimum payments
So if you max out a credit card, your balance will go up. That, in turn, will likely raise your minimum monthly payment. Keep in mind that if you make only the minimum payment each month, it can drag out the time it takes to pay off your balance.
What happens when you overspend credit card limit? ›
Going over your credit limit usually does not immediately impact your credit, particularly if you pay down your balance to keep the account in good standing. However, an account that remains over its limit for a period of time could be declared delinquent, and the issuer could close the account.
What happens when you spend all the money on your credit card? ›
If you spend more than you can pay off immediately, your credit card balance will accrue interest. Interest charges can add up quickly and eliminate any value you've earned through the card's rewards.
What happens if you spend more than the credit limit? ›
When you exceed your credit card limit, you face declined transactions, steep penalties, a drop in your credit score — and the potential for your issuer to freeze or close accounts.
What is the 20/10 rule? ›
However, one of the most important benefits of this rule is that you can keep more of your income and save. The 20/10 rule follows the logic that no more than 20% of your annual net income should be spent on consumer debt and no more than 10% of your monthly net income should be used to pay debt repayments.
Does Capital One let you go over limit? ›
Eligible Capital One cardholders may be able to exceed their credit limits. If your account has access, you can use the Confirm Purchasing Power tool to check whether an overlimit purchase may be approved.
What happens if you use 100% of your credit limit? ›
If you go over your limit and haven't opted into the over-limit program, your card will be declined. In this case, you will have to provide another method of payment to complete the transaction. Increased interest rate. If you exceed your credit limit, your credit card issuer might apply a penalty APR.
Can you buy a car with a credit card? ›
Whether or not you can purchase a vehicle with a credit card will depend on the dealer and the policies they have in place for certain transactions. Many dealers refuse credit card transactions or limit the dollar amount of such transactions due to the hefty transaction fees that often accompany them.
What happens if I max out my credit card but pay in full? ›
Even if you pay enough each month to pay off your balance in full a few months after maxing out your credit card, you may pay the price of a lower credit score along with the bill. You also run the risk of not paying enough or adding more charges to exceed your limit and end up paying a fee or penalty.
You can spend more than $10,000 on your credit card if you have the available credit. Your card issuer could get in touch with you to confirm the transaction isn't fraud. Spending a large amount may hurt your credit score, and it also puts you at risk of credit card debt.
What happens if you spend over $10,000? ›
Credit card issuers have fraud detection systems. These flag transactions outside a cardholder's normal spending habits. So if you're planning to spend over $10,000 in one purchase, then it may trigger your card issuer's fraud detection -- unless this is a regular occurrence for you.
What shouldn't I use my credit card for? ›
They advise against using your credit card to pay for things like rent, gas, cash advances, medical bills, buying a car, and expensive events like weddings. While it can be tempting to put everything on your debit card for budgeting purposes, there are financially savvy reasons to swipe your credit card.
What happens if you spend over your credit limit? ›
Any approved transactions above your credit limit are subject to over-the-limit (or over-limit) fees. This credit card fee is typically up to $35, but it can't be greater than the amount you spend over your limit. So if you spend $20 over your limit, the fee can't exceed $20.
What is a good credit score? ›
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
What is the maximum limit of credit card? ›
Generally, the credit limit for a credit card should not exceed twice an individual's monthly income. However, the issuer may set the limit based on the applicant's credit score and repayment history.
What happens if you use more than credit card limit? ›
If you go over your limit and haven't opted into the over-limit program, your card will be declined. In this case, you will have to provide another method of payment to complete the transaction. Increased interest rate. If you exceed your credit limit, your credit card issuer might apply a penalty APR.
What happens if you use your credit card too much? ›
While spending over your credit limit may provide short-term relief, it can cause long-term financial issues, including fees, debt and damage to your credit score. You should avoid maxing out your card and spending anywhere near your credit limit. Best practice is to try to maintain a low credit utilization rate.
What happens if I use more than 30% of my credit card? ›
Using more than 30% of your available credit on your cards can hurt your credit score. The lower you can get your balance relative to your limit, the better for your score. (It's best to pay it off every month if you can.)
What is the biggest mistake you can make when using a credit card? ›
Not paying on time
Sometimes, schedules are busy and budgets are tight. But it's best to always pay at least part of your credit card bill on time. Missing or late credit card payments can have a big impact on your credit score and fees.
