Credit Card Over-Limit: Convenience or Costly Trap?
Business
M
Moneycontrol•18-01-2026, 11:01
Credit Card Over-Limit: Convenience or Costly Trap?
- •Some credit cards allow spending beyond the sanctioned limit, often called an "over-limit facility" or "buffer."
- •This feature is not free credit; banks allow it to reduce transaction failures and increase revenue through fees and higher interest.
- •Costs include over-limit fees, immediate interest accrual on the excess amount, and potential negative impact on credit scores due to high utilization.
- •Frequent over-limit usage can signal financial stress, create a cycle of debt, and reduce your buffer for genuine emergencies.
- •It should only be used in rare, urgent situations with an immediate repayment plan; better alternatives include formal limit enhancement or expense restructuring.
Why It Matters: Using a credit card beyond its limit offers temporary flexibility but comes with significant costs and risks.
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