Offers
Rates
V-KYC
Debit Card Related
Credit Card Related
SA Welcome Kit 
Manage Mandate(s)
Get Mini Statement
categories
Bloggers
Blog collection
Press Release
What is Credit Card Over Limit Fee & Its Impact
Posted on Thursday, August 22nd, 2024 | By IndusInd Bank
Credit cards are an ideal resource for managing everyday expenses and large purchases. But you can use your credit card up to the credit limit set for the month. Exceeding your credit limit can lead to additional charges known as the credit card over limit fee.
Understanding these fees and their impact on your credit score is essential for maintaining financial health.
What is a Credit Card Over Limit Fee?
- Credit card issuers set a credit limit, which is the maximum amount you can borrow.
- If you exceed this limit, your card may still work. But the credit card issuer may consider it as an over limit credit card. In such a case, you will incur an over limit fee.
- For example, if your credit limit is ₹50,000 and you make a purchase, which brings your total balance to ₹51,000. Here, you may incur an over limit fee.
- Banks have specific policies regarding over-limit transactions. They might decline some transactions to prevent exceeding the limit. However, the bank might also approve some. The latter may lead to an over limit credit card and the associated fee.
What is the Impact of Over Limit Fee on Credit Scores?
Exceeding your credit limit can impact your credit score in negative ways:
1. Increased Credit Utilisation
The amount of credit you use compared to your credit limit is called the credit utilisation ratio. A higher utilisation ratio can lower your credit score. It is advisable to stay below a certain percentage of your credit limit to maintain a healthy credit score.
2. Late Payment Risk
If the credit card over limit fee pushes your balance beyond your ability to pay, it could lead to missed or late payments. Late payments are reported to credit bureaus. In the long run, this can damage your credit score.
3. Account Reviews
If you exceed your credit limit often, it may signal to lenders that you are not managing your credit well. This may lead to reduced credit limits or difficulties in obtaining new credit in the future.
How to Avoid Credit Card Over Limit Fee?
Here are some strategies to help you avoid the over limit fee on your credit card:
1. Track Your Spending
Track your credit card transactions and balance. Ensure you stay within your credit limit. Many banks provide mobile apps and online platforms for easy tracking.
2. Set Alerts
Set up balance alerts to notify you when you are approaching your credit limit. These alerts can help you adjust your spending before incurring a credit card over limit fee.
3. Opt out of Over Limit Spending
Some credit card issuers allow you to opt out of over limit transactions. This means your card will be declined if a purchase exceeds your credit limit. This helps you avoid the fee altogether.
4. Make Multiple Payments
If you make frequent purchases, consider making multiple payments throughout the month to keep your balance low. This can help you avoid a case of an over limit credit card and reduce interest charges.
Also Read: What is Skimming of Credit Cards?
Conclusion
Credit card over limit fees can have a negative impact on your finances and credit score. Understand how these fees work and implement strategies to avoid them. This way, you can maintain a healthy credit profile and avoid unnecessary charges.
To have a smooth credit card experience, consider applying for a credit card with IndusInd Bank. Our diverse range of Credit Cards ensures your transactions are always rewarding, and never stress-inducing. For instance, with the IndusInd Bank Platinum RuPay Credit Card, you can enjoy 2 reward points on every ₹100 UPI transaction and 1 reward point on every non-UPI transaction of the same amount.
Apply now for IndusInd Bank’s range of Credit Cards now!
Disclaimer:
The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.
