Summary of this article
RBI ends automatic over limit charges and strengthens customer control.
Cardholders receive clearer authority through consent-based settings.
Digital toggles let users instantly activate or disable over limit access.
On December 2, the Reserve Bank of India (RBI), announced the imposition of strict rules that prevent credit-card issuers from charging any over-limit fees without receiving explicit consent from the customer.
The new rules seek to protect the cardholders against surprise charges, make billing more comprehensible, and make sure customers decide how and when they want to use the over-limit facility. RBI’s new rules also seek to ensure that credit-card companies make the card-user fully aware of the nature and significance of the fees they are charged.
What Are RBI’s New Rules
Under RBI’s new rules, card issuers cannot allow any transaction that crosses the sanctioned limit unless the customer has specifically opted in for the same. This over-limit facility cannot be 'on' by default. The bank must take clear consent before switching it on. If not consented to, every transaction above the limit must be declined and no fee can be charged to the card-user.
Likewise, RBI has directed credit-card issuers to provide a feature for digital control that will be available on mobile banking, internet banking and other platforms used by the customer. This control will enable the cardholder to switch the over-limit facility 'on' or 'off' based on their needs. As per the RBI the option has to be prominently displayed and a single click must complete the task.
This new rule will apply to all credit-card issuers and is part of RBI's wider effort to make sure there is transparency in card-usage. The central bank has noted that many customers were charged over-limit fees without realising that the facility had been left active. The new rule is meant to prevent such situations.
Why Has RBI Introduced The Rule
One of the most common misunderstandings many card users have revolves around over-limit charges. Over-limit charges generally arise when a transaction takes place in excess of a credit limit by a small number, and many users don't understand how or why it has occurred. In many instances, customers didn't even know that their card had an over-limit facility.
The idea behind the decision is to make sure users understand the conditions attached to over-limit use before exposure to any additional cost.
The rule also encourages banks to keep their communication transparent. Following the imposition of the new rule, issuers must clearly explain risks, charges, and workings of the over-limit facility to customers. This reduces the chance of hidden fees and helps users in making better financial decisions.
What It Means For Credit Card Users
The change brings more control and clarity for credit-card users. Customers not wanting to cross their credit limit can simply keep the facility turned off, ensuring no transaction slips through by mistake. In this case, any attempt to exceed the limit will be automatically declined. It will still be available for those customers who may require a temporary monetary buffer for certain situations. They can temporarily turn on the over-limit facility through their bank's app or website whenever the need arises. In that way, the decision remains with the customer.
The new rule also makes billing more predictable. In the consent-based system, users know precisely when over-limit charges might apply and when they will not. That reduces confusion and helps avoid disputes over credit-card statements.
What Should Users Do
Cardholders should check whether the over-limit facility is on or off in the settings within their banking app or their credit-card portal. If it is on, and they don't want to use it, they should turn it off right away. They should also check their recent statements for over-limit charges that have been levied in the past. Any fee that has been charged without their permission can be challenged with their respective banks.
Such charges, under the new rule, cannot be levied without explicit consent from the cardholder. This will also help customers monitor their available credit on a routine basis. Since the over-limit feature is turned off, transactions above the limit will not go through, so by keeping track of usage, users can avoid declined payments.
