What are Credit Card Over-limit Fees and Charges?

Credit cards are a convenient financial tool that allows you to make purchases and pay for them later. However, it’s essential to understand the various fees associated with credit cards, including over-limit fees and charges. In this blog, we’ll delve into what credit card over-limit fees are, how they work, and how you can avoid them.

Understanding Credit Card Over-limit Fees

A credit card over-limit fee is a charge imposed by your credit card issuer when you exceed your credit limit. Your credit limit is the maximum amount you can borrow on your credit card. When you go beyond this limit, the over-limit fee is triggered. This fee can vary depending on your credit card provider and the terms of your agreement.

How Credit Card Over-limit Charges Work

Credit card over-limit charges are designed to manage risk and discourage cardholders from spending more than their credit limit. Here’s how they typically work:

• Exceeding the Limit: When you make a purchase that puts you over your credit limit, the transaction may either be approved or declined. If your card offers credit over-limit facility then it is approved, and you will incur an over-limit fee.
• Fee Amount: Credit card over-limit charges in India typically range from 2.5% to 3% of the over-limit amount, with a minimum fee usually set around ₹500. These charges vary depending on the bank and the specific credit card. Moreover, GST is also added to this amount.
• Frequency: Over-limit fees can be charged per billing cycle. If you do not pay the balance below the credit limit, you may be charged the fee again in the next billing cycle.
• Notification: Your credit card issuer will notify you if you have opted in for over-limit transactions. If you have not opted in, transactions exceeding your limit will be declined.

Also Read- How to Use a Credit Card? – 7 Best Ways

Avoiding Over-limit Fees on Credit Cards

Avoiding over-limit fees requires careful management of your credit card spending. Here are some tips to help you stay within your limit:

• Monitor Your Balance: Regularly check your credit card balance to ensure you don’t exceed your credit limit.
• Set Alerts: Set up account alerts to notify you when you are approaching your credit limit.
• Opt-out of Over-limit Transactions: If you do not want to risk incurring over-limit charges on credit cards, you can opt out of over-limit transactions. This means any transactions that would exceed your limit will be declined.
• Increase Your Credit Limit: If you find yourself frequently nearing your credit limit, consider requesting a credit limit increase.
• Pay Down Your Balance: Make timely payments to reduce your balance and free up available credit.

Credit Card Over-limit Fee Reversal

In some cases, you can get a credit card over-limit fee reversal. If you’ve exceeded your limit for the first time, reach out to your credit card issuer’s customer service department and request a fee waiver. Although it’s not guaranteed, credit card issuers are often willing to reverse fees for long-standing customers or those with a good payment history.

Impact of Over-limit Charges on Your Credit Score

While over-limit fees themselves do not directly impact your credit score, the behaviour that leads to these fees can. Consistently exceeding your credit limit may result in:

• Higher Credit Utilisation: Your credit utilisation ratio, which is the amount of credit you are using compared to your total available credit, can significantly impact your credit score. Keeping this ratio below 30% is recommended for a healthy credit score.
• Increased Debt: Continually going over your limit can increase your overall debt, making it harder to manage payments and potentially leading to missed payments, which can hurt your credit score.
• Account Review: Credit card issuers regularly review accounts. If you frequently exceed your limit, your issuer might reduce your credit limit or increase your interest rate.

Also Read- 10 Credit Card Hidden Charges that You should Know

The Airtel Axis Bank Credit Card: A Valuable Choice

If you’re looking for a credit card that offers substantial benefits, the Airtel Axis Bank Credit Card is an excellent choice. This card provides annual cashback of up to ₹16,000 and offers a range of discounts including, 25% cashback on Airtel bills, 10% cashback on utility payments and popular services like Swiggy and BigBasket, and 1% cashback on all other spends. Additional perks include up to 15% off at partner restaurants, a 1% fuel surcharge waiver, and four annual domestic lounge accesses. With a credit limit of up to ₹5,00,000, this card provides significant value and flexibility for managing everyday expenses and maximising savings.

Conclusion

Understanding credit card over-limit fees and charges is crucial for maintaining healthy financial habits. By being aware of how these fees work and taking steps to avoid them, you can manage your credit card usage more effectively. Additionally, choosing a credit card with valuable rewards and benefits, like the Airtel Axis Bank Credit Card, can help offset potential fees and enhance your overall credit card experience. Always stay informed, monitor your spending, and use your credit card responsibly to avoid unnecessary charges and maintain a good credit score.

Also Read- Credit Card Balance Refund – Process, Time & Everything

FAQs

1.  What is an over-limit fee on a credit card?

An over-limit fee on a credit card is a charge imposed when you exceed your credit limit. This fee is added to your balance and can vary based on the card issuer’s policies.

2.  How can I avoid over-limit charges in credit cards?

To avoid over-limit charges, monitor your credit card balance regularly, set up alerts, opt out of over-limit transactions, request a credit limit increase if necessary, and make timely payments to keep your balance low.

3.  Can I get a credit card over-limit fee reversed?

Yes, you can request a reversal of a credit card over-limit fee by contacting your card issuer’s customer service. Although it’s not guaranteed, having a good payment history can increase your chances of success.

4.  Do over-limit fees affect my credit score?

Over-limit fees themselves do not directly affect your credit score. However, consistently exceeding your credit limit can negatively impact your credit score.