They can only reach as high as the amount that was exceeded. For example, if you exceed your credit limit by $100, you could expect an over-limit fee of $100 at the maximum, though the amount may be less than that. Nevertheless, not all credit card issuers charge this fee.
If you go over your credit limit, your card could be declined. If you're part of the optional over-the-limit coverage program, you could also be charged a fee for each billing cycle that you exceed your credit limit. Your credit card company must tell you how much these fees are before you opt in.
Generally, banks may approve transactions surpassing the credit limit as a service gesture, provided the cardholder has consented. While there are no strict rules governing Credit Card over limit usage, utilising this facility only in exceptional circumstances is advisable.
Transactions may be declined
Some credit card issuers decline transactions when cardholders reach their credit limit, which can be frustrating. You may be able to continue using your card beyond your limit, but only if you've agreed to participate in your credit card issuer's over-the-limit coverage program.
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.
You can't overdraft a credit card unless you've specifically opted into over-the-limit coverage with your card issuer. But spending more than your limit on a credit card isn't typically called overdrafting — that's a term you'd use with your bank account.
Keeping your credit utilization below 30% protects your credit score. But if you want to boost your score as much as you can, keep your ratio under 10%. FICO scores range from 300 to 850, and my score usually fluctuates between 820 and 830.
And since it hurts your credit scores if you even approach 100% utilization on a card, try to keep balances below about 30% of your borrowing limits. Scores often respond quickly as high card balances are paid down, and you can track this by monitoring your FICO® Score☉ for free through Experian.
Balance transfer fee. This fee will typically be 3% to 5% of the amount transferred, which translates to $30 to $50 per $1,000 transferred. The lower the fee, the better, but even with a fee on the high end, your interest savings might easily make up for the cost.
A cardholder must opt in to allow transactions over their credit line to be made in exchange for this penalty being assessed. If a cardholder does not opt in, any transactions that will exceed their credit line will most likely be declined.
Helps keep Credit UtiliSation Ratio Low: If you have one single card and use 90% of the credit limit, it will naturally bring down the credit utilization score. However, if you have more than one card and use just 50% of the credit limit, it will help maintain a good utilization ratio that is ideal.
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.
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.
Over-the-limit coverage will allow you to exceed your card's credit limit by up to 10% of your credit line.
The Takeaway
The 15/3 credit card payment rule is a strategy that involves making two payments each month to your credit card company. You make one payment 15 days before your statement is due and another payment three days before the due date.
Never borrow more than 20% of your annual after-tax income. Keep your monthly debt payments to less than 10% of your monthly after-tax income. Keep track of your purchases and don't buy expensive and unnecessary impulse items. This is the best way to increase your credit score and avoid fees.
It's important to know your card's credit limit, which is the maximum amount you can spend on your card. Also important: your available credit, which is the limit minus your current balance.
For starters, being over your credit card limit could mean we decline any new transactions. This might include automatic payments or direct debts, like gym memberships or online streaming subscriptions.
Going over your credit limit can result in declined transactions, over-the-limit fees and a possible decrease in your credit score.
According to the RBI FAQs, “Usage of a credit card beyond the sanctioned credit limit (i.e., overlimit) requires prior explicit consent of the cardholder, as a fraud minimisation mechanism.
Increased scrutiny and potential account closure
When you exceed your spending limit, your account may be flagged for closer monitoring, potentially leading to more frequent account reviews. In extreme cases, repeatedly exceeding your limit might prompt the issuer to close your account altogether.
We won't charge a fee if your account is overdrawn by $5 or less at the end of the day. If your account is overdrawn by more than $5, a fee will be charged on each overdraft transaction, regardless of the amount.
A negative credit card balance is when your balance is below zero. It appears as a negative account balance. This means that your credit card company owes you money instead of the other way around. Typically, this happens when you've overpaid your outstanding balance or if you've had a credit returned to your account.