What are Credit Card Over Limit Charges and How to Avoid Them

  • Published on: 21 Nov 2023
What are Credit Card Over Limit Charges and How to Avoid Them

Financial institutions levy credit card over limit charges when you spend more than your sanctioned credit card limit. While this increases your credit card bill amount, it has other negative effects, too.

Understanding these charges helps you manage your use of credit and your finances. Read on to learn what is over limit in credit cards, tips to avoid it and more.

What is a Credit Card Over Limit Fee?

Remember, all card issuers approve a specific credit limit to you based on numerous parameters. When you use your credit card over the limit sanctioned by issuers, they will levy a charge for the same. 

The over limit fee for a credit card can differ based on the amount you have crossed over and your issuer. Knowing these charges beforehand is crucial to help you plan your expenses better.

Also Read: Benefits of Credit Cards

What Happens When You Exceed the Credit Card Limit?

Here are the negative effects associated with exceeding your credit card limit.

Over Limit Fees

First and foremost, exceeding your card limit means that you will have to pay the credit card over limit charges levied by the card issuer. These charges increase your total credit card bill amount and are calculated on the total balance that is outstanding above your credit card limit. Most issuers charge 2.50% of the outstanding amount as the over limit fee.

Interest Charges

Apart from the over limit fee for a credit card, many financial institutions also increase your credit card interest charges when you exceed the limit. They charge a higher interest on the total outstanding amount. This ultimately increases your bill amount and can cause financial strain. 

Reduced Credit Score

Going above the predetermined credit card limit also leaves a negative impact on your credit report and hence reduces your credit score. This is because a higher utilisation of credit reflects that you have an unstable financial standing, implying a higher risk of non-payment of bills. It is ideal to maintain a credit utilisation ratio (the percentage of credit limit used) of less than 30%.

Also Check: Personal Loan Online

Tips to Avoid Credit Card Over Limit Fee

Here are some tips that can help you avoid the over limit fee for a credit card.

  • Check your credit limit before you carry out any transactions
  • Pay the entire or a portion of the outstanding balance to restore your limit
  • Request the issuer to increase your credit limit to meet your requirements
  • Keep tabs on your limit through the alert facility and mobile app provided by the issuer
  • Apply for more than one credit card so you have a higher limit for your needs

Being aware of your credit card limit and using your card accordingly is one of the simplest ways to avoid credit card over limit charges and other penalties. Staying vigilant and making responsible use of the card can help ensure that you enjoy continued access to its benefits.

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FAQs on Credit Card Over Limit Fee

How do I remove the over limit fee from my credit card?

Credit card issuers eliminate the over limit fee for a credit card when you repay the full or a part of the due amount. You can also reach out to the customer service of the issuer and request a waiver.

What happens if you use a credit card above the limit?

When you cross the approved credit limit, the issuer levies credit card over limit charges. There may be a possibility of your card getting declined until you clear your dues. In addition, your issuer can increase the interest rates.

What happens if you use over 90% of the credit card limit on a credit card?

When you utilise more than 90% of your card limit, it can have a negative impact on your credit score. This is because a higher utilisation of your credit limit shows higher reliance on credit. 

Can I use the 100% limit of a credit card?

Yes. While you can utilise the card limit to the maximum, know that doing so can have a negative impact on your score. So, it is better to keep your credit card utilisation ratio below 30%.

Is it okay to use 50% of your credit limit?

A credit utilisation of 50% or above can harm your financial profile since it reflects a higher reliance on credit. This implies that you rely more on credit to cover your financial obligations. Therefore, keeping your credit utilisation ratio below 35% is ideal.


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