Credit Card Over Limit
Credit cards come of great use in that they provide convenience to the card holder for shopping – both online and offline. Apart from that, they can be utilized to pay off any bills and to earn any reward points that might be offered to the owner. When the card holder is going through a financial crisis and facing shortage of finance in any form, the credit card steps in as a temporary relief and makes the payment that can be repaid within the given deadline.
However, these credit cards also come with some charges and interest that might be applicable depending on its use. These assist the customer in steering away from any unnecessary expenditure and extravagant purchases. One of the concepts introduced for this purpose is the ‘credit card over limit’. Before delving into it, it is important to point out that each credit card has a set credit limit which happens to be the maximum amount which can be spent using a particular credit card. This is set and agreed upon by the card issuer and the card holder. When the customer goes beyond this set limit, they are said to go ‘over limit’. This is followed by a credit card over limit fee or a credit limit fee.
With the introduction of the Credit Card Act in 2009, the credit card holders were provided with a choice to opt in or out of the credit limit charges. Therein, many of these customers decided to rid themselves of these charges. However, the credit card issuers continue to levy credit card over limit fee for users who exceed the credit limit.
Credit Limit in Credit Cards
There are regular interventions in the mind of a credit card holder who wants to make a sizeable purchase or transaction using their credit card but then restrain themselves from doing so. This is usually because they cannot be sure if the transaction is within their credit limit and if the purchase would incur a credit card over limit. This is because every credit card has an upper limit or maximum amount that can be used for any sort of expenditure during a billing cycle. This is what is called the credit limit. It is set by the financial institution that issues the card to the customer. The credit limit is decided upon by looking at the customer’s credit score, their income and the debt that they carry at the time of issue.
The policies of the bank are also one of the factors that might affect the credit limit of the credit card. The setting of the credit limit is like a precautionary measure in that the issuer of the card is trying to ensure that the amount that the card holder spends while using the card can be within their capacity to repay the said amount. After the card has been issued, the credit limit can be increased or decreased again based on the expenditure made using the card, the repayment routine of the user and any new policies that might have been introduced by the issuing institution. If the customer has regularly repaid the outstanding balance and has not incurred the credit card over limit fee, they can be given a choice to increase their credit limit.
Exceeding the Credit Limit or Credit Card Over Limit
As mentioned above, each card holder has a specific credit limit i.e. upper limit on the card that they own. If this card holder spends beyond the credit limit of the card, it is normal to wonder if the transaction will be approved or not. However, the answer is not a straightforward yes or no. The allowance of this kind of transaction may be based on the card that the user is carrying. This means that some of the credit cards allow these transactions but charge a credit card over limit fee for the same while others may just reject the initiated transaction. There are some charge cards that may not impose a credit limit on the user depending on the fact that the amount is repaid in full at the end of the billing period.
The consequences of the user exercising the credit card over limit option can change if they have obtained the credit card over limit protection which gives the allowance to spend over limit. This credit card over limit protection allows the user to make occasional over limit purchases beyond the credit limit. However, this protection is no longer available on many credit cards. However, if one does opt for over limit protection, the transaction may be allowed to go through but there might be additional fees and higher rate of interest along with the lowering of credit limit on the card. The increase in outstanding balance may also reflect poorly on the credit score of the person. Regular credit card over limit charges may result in closure of the account by the bank.
Credit Card Overlimit Fee
The credit card over limit fee is an amount that is charged by the bank or institution that issues the card holder’s credit card when their expenditure using the card exceeds the credit limit of their card. It is mostly beneficial to the user too as it saves them from unnecessary debt traps and difficulties that might arise due to overspending. However, if the user is experiencing a financial crunch and is in a tough spot, the banks may allow the transaction to take place and later charge the credit card over limit fee. The amount of the fee that will be charged on credit card over limit is specified in the terms and conditions agreed upon by the issuer and user of the credit card.
How Does Credit Card Over Limit Affect Credit Score?
The user often is intrigued whether going over the credit limit might get them reported to the credit bureau or affect the credit card score in any way. If the user goes over limit and pays the credit card over limit fee, they do not get reported to the credit bureau and their credit score does not face any consequences. However, looking at it from another point of view, it is imperative to note that if the user has paid the credit card over limit fee, this clearly indicates that they have not only exhausted their credit limit but gone beyond it. Therefore, this means that they have utilized their credit to a great extent.
This is not advisable given the fact that the credit card utilization, as noted by the experts, should not exceed more than 20-30% of the credit limit in a particular billing period. This helps prove that the user does not overspend and uses the credit card in a responsible and accountable manner. It leads to an automatic increase in the credit score of the user. Therefore, if we look at the opposing scenario, over utilization of the credit to the point that the credit limit has been exceeded displays extravagant expenditure patterns, thus deteriorating the creditworthiness and the credit score of the customer. Regular exceeding of the credit card over limit will have a certain and adverse impact on the credit score.
How to Avoid the Credit Card Over Limit Fee?
The user can also avoid paying up the credit card over limit fee by acting on the methods provided below and by being alert on their own part while using their credit card to make a purchase.
- Monitor or check your expenditure frequently
The card holders should be attentive and alert in that they should be aware of the amount that they have spent on the transactions and purchases made through the credit card. This is the very first check to not exceed the overlimit and therefore, escape paying the overlimit fee. If the card holder keeps a regular check on the amount spent adn are aware of the credit limit of their card, they can try to manage the expenses within the limit itself.
- Sign up for credit limit alerts.
Some credit card issuers may provide the option of alerting the customers whenever they are within some percentage of or a dollar short of exceeding the credit limit. This is done either through messaging or via email. The customer can check their account or get in contact with the customer support to find out whether they can get these alerts from the bank too.
- Check your Credit limit beforehand.
If the customer is not aware of the credit limit itself, it becomes quite difficult to navigate purchases and expenditure. This means that they would have no knowledge of the credit card over limit if they exceed the credit limit. Therefore, the user needs to find out the credit limit for their card. This can be done by checking the billing statement whenever it is generated at the end of the billing cycle. If not, the user can call the customer care number that has been provided on the card to do so. Some institutions have their own app so that the customer can track their balance, credit limit, etc. This will give the user an idea about the credit limit and inform them when it is increased or decreased due to some reason.
- Maintain a low balance on the credit card.
When the customer has a low balance i.e. just some percentage of the credit limit provided on the credit card, this gives them space to purchase and carry out their transactions without going anywhere near the credit limit or incurring the credit card over limit fee. This also translates to the credit score of the customer which increases due to the low expenditure from the credit card.
- Do not dwell on the uncertainty of certain facets.
If the user is unsure of certain aspects like the credit limit or the balance of the card, they should check it once before they go forward with a transaction. A lot of credit cards have started providing automated 24/7 services for these queries such that the customer can check in at any time and gain this type of information.
How Can One Get Credit Card Over Limit Fee Reversal?
The credit card issuer may go easy on the card holder the very first time that the credit card over limit fee is charged and therefore may be willing to exempt them from paying and waive off the fee charged. The customer can call the issuing bank or organization and explain the exceeding of the credit limit, thus asking if the fee can be waived off. The issuer of the card may agree to do so on the condition that the account otherwise has been maintained. If this is not possible after the efforts, the customer can pay the balance a good amount below the credit limit that has been set for their card. This will prevent them from being charged the credit card overlimit fee the following month. This means that the balance of the credit card should be used to such an extent that the interest levied on the expenditure and any fee will still keep the balance within the credit limit provided.
It is not an unknown fact that the use of credit card over limit is not a choice that the users should make willingly and voluntarily. In majority of the cases. Such a transaction will be automatically rejected. However, if the amount of transaction comes anywhere near the credit limit, the user should consider paying off the credit card balance to avoid being pushed over the limit.
Unlike a majority of the banks charging the over limit fee on credit cards automatically, SURE does not recommend the credit card over limit facility and therefore, the customer at SURE will be reminded to pay off the outstanding balance in full without any hassles like drawing from the overlimit, paying the minimum due etc. Due to the reminder, the customers will keep an eye on the balance of the account thus avoiding exceeding the limit. This will therefore keep the consequences for the same at bay from the credit card holder.