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Can You Use Your Credit Card Beyond Your Credit Limit?

Saroni Chakravarti


When a bank issues a Credit Card to us, it also sets a limit in terms of how much we can purchase using the card. This is what is known as “credit limit”. But did you know that we can, in fact, make purchases above the available credit limit? And in doing so, we would be availing the facility called the “over limit” facility? Let’s find out more.

Credit Limit

When a bank issues a Credit Card to you, it sets a credit limit on your card basis a number of factors including your Credit Score, debt-to-income ratio, credit profile etc. Your credit limit decides the maximum amount that you can spend using your card at any given time. This is to ensure that you don’t chew off more than you can bite and can easily repay the money you borrow within a certain period of time.

Although the bank sets the credit limit at the time of issuing the card, this limit is not set in stone and can be revised periodically if you have a good payment record, Credit Score or an increase in income. In fact, card issuers offer the option to cardholders themselves to revise their credit limit and set a limit of their choice as long as it is within the overall limit set by the card issuer. Usually, banks don’t charge for setting or changing the credit limit.

Who Is Eligible For “Over Limit”?

Card issuers allow all Credit Card users the over limit facility. You are presented with two options at the time of making a transaction that exceeds your credit limit – either to transact beyond the credit limit or decline the transaction when crossing the credit limit. So you can either opt in or opt out of “over limit” transactions at the time of making the payment/transaction.

Is There A Limit On The Over Limit Facility?

Although banks provide the over limit facility to customers, ideally it’s usage should be restricted to exceptional circumstances and emergency use only. Currently, there is no standard rule regarding the limit on the over limit of Credit Cards. However, most banks generally allow transactions up to ten percent over and above the assigned credit limit of a cardholder. Although banks will allow these transactions to go through, they will apply the associated charges which would be a minimum payment (from Rs. 300 to Rs. 500) or 3 percent of the amount over the limit plus taxes and charges (if any), whichever is higher.

Will You Get An Alert When You Exceed The Credit Limit?

Some banks call customers if they notice an over-limit transaction just to ensure that there is no fraudulent activity. They will also explain the charges associated with the transactions during this time. However, not all banks will call you. Some of them might not get in touch with you if you are transacting within the permissible over-limit on your card limit (which is normally 10 percent). The way banks inform their customers varies.

What Are The Charges?

Here are details of some of the banks’ charges on over limit:

  1. HDFC Bank: 2.5 percent on the ‘over limit’ amount, subject to a minimum of Rs. 500.
  2. State Bank of India: 2.5 percent of the over-limit amount or Rs. 500, whichever is higher will be levied.
  3. Citibank: 2.5 percent of the amount (excluding fees, charges and taxes) over the credit limit, subject to a minimum of Rs. 500.
  4. ICICI Bank: 2.5 percent of the amount that exceeds the limit/ the ‘over limit’ amount, subject to a minimum of Rs. 300
  5. Axis Bank: 3 percent on the ‘over limit’ amount, subject to a minimum of Rs. 500

Impact Of Making Transactions Over The Credit Limit

When you’re availing the over-limit facility, you not just end up paying a fee but it could also hurt your Credit Score. This is because you tend to exceed your Credit Utilisation Ratio (CUR) by over 30 percent. Moreover, it also negatively impacts your chances of availing loan against Credit Card at times of financial exigencies.

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