Can You Use Your Credit Card Beyond Sanctioned Limit? Here's What Happens If You Surpass

While this limit is determined based on factors such as credit history, CIBIL score, income, and repayment capacity, some users may find it restrictive, particularly those who frequently transact

Credit limit, as implied by its name, is the predetermined maximum amount set by credit card issuers or banks upon issuance of a credit card.

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When individuals are issued credit cards by banks, they are typically assigned a credit limit, signifying the maximum amount they can spend or transact using the card. While this limit is determined based on various factors such as credit history, CIBIL score, income, and repayment capacity, some users may find it restrictive, particularly those who frequently transact.

Despite the apparent restriction of not being able to exceed the credit limit, there are instances where users can surpass this limit through an 'over limit facility' provided by banks. This facility is extended based on the borrower's spending and repayment behaviour, as reflected in their credit card statements. In the following you will find what happens if you surpass the limit. 

Understanding Credit Limits

Credit limit, as implied by its name, is the predetermined maximum amount set by credit card issuers or banks upon issuance of a credit card. This limit is determined considering factors such as credit score, repayment history, income, and debt-to-income ratio. It serves as a safeguard to ensure borrowers do not overspend and can repay their debts promptly.

While initially set by the bank, credit limits are not entirely fixed and can be revised based on factors such as previous repayment patterns, increased income, or improved credit scores. Banks may even offer borrowers the flexibility to adjust their credit limits themselves, often at no extra cost.

Criteria for 'Over Limit' Eligibility

The option to exceed the credit limit is typically offered to borrowers with a consistent repayment record, additional income sources, salary increments, higher credit scores, and a longstanding relationship with the bank. Additionally, some banks may automatically increase credit limits based on favourable factors without the need for explicit requests from the borrower.

Notification and Charges

Banks may or may not notify customers when they exceed their credit limits, depending on their policies. However, borrowers can often set up alerts to monitor their spending. While some banks may increase credit limits without charges under specific conditions, others may require borrowers to request a limit increase, potentially incurring additional fees.

Impact on Credit Score

While accessing over limit facilities can offer greater spending flexibility, it's essential to exercise caution. Overspending can lead to a higher credit utilisation ratio, negatively impacting credit scores. Maintaining judicious spending habits despite higher credit limits is advised to avoid future financial repercussions.

While banks offer over limit facilities to credit card users, responsible usage remains crucial to maintain financial stability and protect credit scores. Users are encouraged to stay informed about their credit card terms and exercise restraint in their spending habits.