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What is a Credit Card Over Limit Fee?

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Created on
April 27, 2023


What’s Inside

Credit cards have many benefits, such as interest-free loans for up to a period, reward points, and cashback. When used smartly, they can help you save a lot on your daily expenses. That being said, there are certain rules you must follow to reap the maximum benefits of this financial tool. One of them is the specific terms and charges incurred while using a credit card. The credit card over limit charges or overlimit fee is one such aspect.

In this post, you will find out everything you need to know about the over limit charges to avoid any penalties in the future.

How Do Over Limit Charges Work?

Credit cards come with a credit limit that is unique for each user. Ideally, you should never spend more than 30% of your total credit limit if you wish to retain a good credit score.

What Happens When You Exceed It?

You incur over limit charges on your card, a kind of penalty issued by the credit card company. This is detrimental to your credit score and can force your card issuing company to close the account permanently.

So, it is crucial to understand the credit card over limit fee and manage your finances responsibly.

The good news is that credit card issuers cannot charge an over limit fee unless users exceed their spending or credit limit. It is also mandatory for banks to seek permission before charging any penalty fee. However, if you decline the fee, your transaction will not proceed.

How to Avoid Over Limit Fees

The best solution in such a scenario is to not incur the charges in the first place. There are two easy ways to do this:

  • Do not overspend: This goes without saying that keeping your monthly expenses below the credit limit is the best option. Not only will you be able to avoid the unwanted over limit fee, but you will also improve your credit score.
  • Pay off the entire balance early: However, if you do end up spending above the credit limit, it is advisable to pay off the entire balance monthly. This will help you avoid the charges and any additional higher interest rates.
  • Increasing your credit limit: depending on your credit history, repayment history, and credit utilisation, you can request to increase your credit limit. This, in turn, can help you keep your spending below the credit limit.


Credit cards offer many benefits, but it's important to understand specific terms and charges. Exceeding your credit limit incurs over limit charges, which can harm your credit score and result in account closure. However, banks can't charge the fee without permission, and the best way to avoid it is to not overspend or pay off the balance early. Increasing your credit limit can also help you stay within your spending limits.

If you're looking for a credit card that gives you the best bang for your buck, try the Fi-Federal co-branded Credit Card. This might just be what you need. With this card, you're assured of a 2% valueback through rewards. But that's not all, as you'll also get 5x on your top 3 brands, 2x on all partner brands, and 1x on everything else, including rent and fuel. Enjoy airport lounge access, 1% forex, the freedom to choose your own billing cycle, and personalized reminders. With consolidated spend insights, you can easily track your spending and make informed financial decisions.

Frequently Asked Questions

1. How do you avoid over limit fees?

It is best not to exceed the spending above your credit limit. However, if you spend more, the best thing to do is to pay off the entire balance before the end of the month. This will help you avoid any additional charges.

2. Is the over limit fee charged daily?

No, the credit card issuer can only charge an over limit fee once in a billing cycle. If the balance goes over the limit, whether due to overspending or delay in repayment, they can charge this fee for two billing cycles at a stretch.

3. How is over limit calculated?

Over limit, charges are calculated on your total outstanding balance above the credit card limit. It is charged at 2.5% of the exceeded amount, with a minimum charge being ₹500.

4. Is the over limit fee bad for credit?

Yes, over limit charges can drop your credit score due to the increased balance. Incurring these charges too frequently can even get your account closed.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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