Credit Card Over Limit Fees: What You Should Know
27 May, 2025
Synopsis
Credit Card over-limit charges occur when transactions exceed the approved credit limit, resulting in additional fees.
Cardholders need to provide explicit consent to exceed the predetermined credit limit.
Exceeding your credit limit can negatively impact your credit score by increasing credit utilisation and signalling financial mismanagement.
In times of financial emergencies, having a Credit Card can provide essential support by allowing immediate access to funds. However, exceeding the designated credit limit on your card can lead to unforeseen charges. Credit Card over-limit charges come into play when transactions surpass the predetermined credit ceiling set by the card issuer. Understanding the Credit Card over-limit charges is crucial to responsibly manage your finances and avoid unnecessary fees.
What is the Over Limit Fee on Credit Card?
When you exceed your approved credit limit, the Credit Card issuer applies a Credit Card over-limit fee. When a transaction, fee or interest charge causes your balance to go over the set credit limit, the issuer may apply an over-limit fee to your account. This fee is typically a fixed amount and is in addition to any interest charges that may accrue on the excess amount.
How Do Over Limit Charges in Credit Card Work?
Using a Credit Card beyond the sanctioned credit limit is known as ‘over limit.’ It involves specific protocols and mechanisms designed to protect both the cardholder and the issuer. Typically, cardholders must provide explicit consent to enable over-limit transactions, to prevent fraud. This consent is usually managed through the card issuer’s platforms, such as internet banking, mobile apps or other accessible mediums. Without this prior approval, neither over-limit transactions nor associated charges can be applied.
For instance, if you use an HDFC Bank Credit Card and exceed your credit limit, the over-limit charges will apply only if you have opted into the over-limit facility. For most HDFC Bank Credit Cards (excluding the Infinia card), the charges for exceeding your credit limit are 2.5% of the over limit amount with a minimum fee of ₹500. This means that if your balance goes beyond your credit limit, you will incur a fee based on the excess amount.
Factors That Impact Your Credit Limit
Your credit limit on a Credit Card is influenced by several factors determined by the issuing bank:
Employment Status or Income: Your income is a significant factor in determining your credit limit. Higher income generally leads to higher credit limits because it indicates greater financial stability and the ability to handle larger credit balances. Additionally, stable employment can also positively affect your credit limit, as it demonstrates consistent income.
Credit Score: Your credit score is a crucial factor in setting your credit limit. Having a high credit score reflects a strong credit history and responsible credit management. This can result in a higher credit limit. Contrarily, having a lower credit score may lead to a lower credit limit.
Credit History: A strong credit history with timely payments and responsible credit use often results in a higher credit limit. Banks assess your creditworthiness based on your repayment history with other lenders and Credit Cards.
Debt-to-income Ratio: Credit Card issuers evaluate your debt-to-income ratio. It is the proportion of your monthly income that you utilise to repay debts. A lower ratio suggests you can manage additional credit responsibly.
Credit Utilisation: This is the percentage of available credit that you are currently using. Maintaining a lower credit utilisation ratio (typically below 30%) demonstrates responsible credit management. This may lead to higher credit limits over time.
Impact of Credit Card Over-Limit Fee on Your Credit Score
The impact of Credit Card over-limit fees on your credit score can be significant. Exceeding your credit limit and incurring over-limit fees increases your overall credit utilisation ratio. High credit utilisation can lower your credit score because it suggests potential financial strain or overreliance on credit.
Additionally, frequent instances of exceeding your credit limit may indicate financial mismanagement to future lenders. This can potentially affect your creditworthiness. To maintain a healthy credit score, it is suggested to monitor your Credit Card balances closely. Keep your credit utilisation low by staying well within your approved credit limit. Finally, make complete and timely Credit Card bill payments.
Get An HDFC Bank Credit Card with Easy Limit Enhancement
HDFC Bank offers a variety of Credit Cards designed to cater to customers' diverse needs. While enjoying the perks of an HDFC Bank Credit Card, it is crucial to manage your spending. This helps to stay within the approved credit limit and avoid over-limit charges. Should the need arise, you can increase your credit limit seamlessly through our online platform or mobile banking app. By staying informed about your credit limit, you can make the most of your HDFC Bank Credit Card experience.
Explore the range of HDFC Bank Credit Card and apply here.
*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Credit Card approvals at the sole discretion of HDFC Bank Limited. Credit Card approvals is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
