Credit Card Over-limit Facility
When you receive a credit card, your bank will assign a credit limit to it. The most you can borrow from a credit card is known as the credit limit. The bank establishes this limit based on a number of variables, including your credit history, repayment history, credit score, previous obligations, and so forth. A credit limit stops you from exceeding your credit limit.
The credit limit is decided by the bank based on your repayment capabilities and your income. However, credit limit can be changed eventually. It is periodically increased based on how your card is used, how you pay your bills, and other factors. Additionally, customers that maintain good relations with the bank typically receive credit limits that are greater.
What is Over-Limit?
An advantage known as Over Limit is provided to a chosen group of clients based on how they use their credit card. No specific number constitutes "over limit" consumption. The credit card company's perception of you is all that is taken into account.
Let's take an example where you swiped your card at the merchant for a bill value of Rs. 80,000 and your credit limit was Rs. 60,000. The bank then informs you of the over limit usage and offers you the chance to take advantage of the over limit. The transaction can only go through with your approval. The problem with exceeding your credit limit is that you will pay extra interest on the excess money. This often amounts to 2.5% to 5% of the additional funds you have accessed.
Additionally, you will be informed about the refused transaction if you decide not to use the over limit. This is merely a warning that you should control your spending as you are getting close to your credit limit. Additionally, keep in mind that the amount exceeding the limit is not interest-free. The standard interest rate will still be applied to the usage. Additionally, overage usage varies depending on the bank. While most banks only permit purchases up to 10% over the credit limit, some allow transactions up to 20% over the limit. It is therefore best to consult with your bank before using the over-limited facility.
Over-Limit Facility Eligibility
Any cardholder who uses their card responsibly, pays their bills on time, keeps their credit usage low, and maintains good account standing is eligible to use the over limit. If your credit score is below average or you have a poor payment history, a bank will not grant you access to the over limit facility.
Is Availing Over-Limit Facility a Good Idea?
In an emergency, exceeding the limit may be a smart decision, but doing so regularly might result in significant debt accumulation. Overage fees that are added on will be ineffective in the long term. It is preferable to avoid going over your credit limit and to maintain your credit utilisation low. If you really need money, you can look into other options including borrowing from friends or family, taking out a short-term personal loan, getting a salary day loan, getting a gold loan, etc.
Additionally, if you frequently use the over limit feature, it's time to sit down and evaluate your financial status and make any necessary significant changes. Find more efficient ways to pay your expenses and lower your credit usage.
Over-Limit Facility and Credit Score
You cannot conceal over limit usage from a credit rating agency. The rationale is that exceeding your credit limit and accruing interest over what is permitted will be counted towards your credit utilisation and, consequently, lower your credit score. In an emergency, going over your credit limit can help you preserve your credit score. However, if you frequently charge more than your credit limit, it's possible that your credit score is already poor and that using your credit above its maximum won't help.
Banks keep track of your credit utilisation and over limit usage, which might have an impact on your credit score. Your creditworthiness can be inferred from this in general. Therefore, the banks can acquire a general impression of your creditworthiness if you frequently transact and do not pay your bills on time.
FAQs on Over Limit Facility on Credit Card
- What does over limit usage mean?
Some banks provide their customers with a credit option known as over limit usage. If you use this feature and charge more than your credit limit, your bank will charge you an extra fee for going over your credit limit.
- What fees are associated with using the over limit facility?
Banks typically charge 2.5% to 5% of the amount that exceeds the limit.
- How much more than my credit card's limit may I charge?
Depending on the bank, there are various over limit fees. Some banks let you use up to 20% more than your limit, while others only let you use 10% more. To be sure you can utilise the over limit facility, please check with your bank.
- How can I tell if my credit card has been overused?
To discover if you have adequate credit available to make purchases, check your credit card statement. When you transact, the majority of banks offer you alerts with information about your purchase amount and remaining credit limit so you can make an informed choice.
- What other credit choices are there to use the over limit facility?
You can choose immediate personal loans, gold loans, top-up house loans, or other alternative credit choices in place of using the over limit facility.
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