I've never heard of anyone defining a credit limit as part of payment terms. Credit limit is a separate (though obviously related) aspect of their account. When you get a credit card and they issue you a $1000 limit it's up to you to ensure you don't go over it, and you will pay a penalty and/or have transactions declined if you go over.
 
What we do is, when the "over credit limit" warning comes up (I think that's an SD-Q setting) is evaluate what the situation is, and either notify the customer that they need to prepay if it's the only order, or catch up if they have outstanding orders, regardless of whether they're past due or not. Some of them have a hard time understanding why they need to pay when they're not past due but a simple credit card explanation usually does the trick. Of course, sometimes a review of the account justifies raising the credit limit.