Outlook Money
Credit cards come with a fixed spending limit. If your outstanding balance goes beyond this limit, the issuer may charge an overlimit fee and additional costs.
Overlimit charges generally depend on the excess amount spent. They are often around 2-3 per cent of the overlimit value, with minimum fees near Rs 500.
Cardholders may also have to pay 18 per cent GST on overlimit charges, increasing the total amount payable beyond the original fee.
Even after crossing the limit, interest may continue on the total outstanding amount. Credit card interest rates are usually around 3-3.75 per cent per month.
The RBI requires card issuers to take customer consent before activating overlimit facilities. Users can also disable this option whenever they choose.
Spending beyond the credit limit can increase the credit utilisation ratio, which is considered an important factor in assessing a borrower’s credit profile.
Monitoring expenses, setting alerts, reviewing statements and maintaining controlled credit usage can help cardholders avoid overlimit charges and manage their credit profile better.