What is Overlimit Fee in Credit Card? Most Banks in India

Sometimes, when you are checking your credit card statement in a mobile app, you suddenly notice a ₹500–₹800 charge called “Overlimit Fee” or “Over Limit Penalty.”

Every credit card comes with a credit limit, such as INR 50k or 1 Lakh— this is the maximum amount the bank allows you to spend on that card. If your total outstanding amount goes above this approved limit, sometimes the transaction still goes through above your limit. Later, the bank adds a penalty charge. That penalty is called the overlimit fee.

Simple meaning for you: Spending more than your card limit = Overlimit fee charged on your card. Even a small extra amount — say your limit is ₹50,000, and your bill becomes ₹50,010. It can trigger the fee.

Overlimit Fee — Key Rules & Charges

Main Rules

• Mandatory opt-in: Overlimit facility is usually OFF by default. You must enable it in the mobile app or net banking.
• If not enabled: Transactions that cross the limit will simply decline — no fee charged. It shows failed, and no one can force you for facility.
• One-time charge: Even if you exceed the limit multiple times in a month, the bank usually charges the fee only once per billing cycle.
• Interest also applies: The extra amount above the limit still attracts normal finance charges, around 3%–3.75% per month until paid.

Standard Fee Structure

Component	Typical Charge
Percentage fee	About 2.5% of your total overlimit amount
Minimum fee	₹500–₹600 (whichever is higher)
GST	18% on the fee amount

Example 1 — Small excess

You cross limit by ₹2,000

• 2.5% of ₹2,000 = ₹50
• Bank minimum fee = ₹600 → applies
• GST 18% on ₹600 = ₹108

Total penalty = ₹708

Example 2 — Higher excess

You cross limit by ₹40,000 (for example big purchase)

• 2.5% of ₹40,000 = ₹1,000
• Now ₹1,000 is higher than minimum ₹600, so percentage applies
• GST 18% on ₹1,000 = ₹180

Total penalty = ₹1,180

So the bank always compares: 2.5% calculation vs minimum ₹500–₹600 → whichever is higher gets charged.

Important practical point = The real loss is not only the fee. The overlimit amount also starts monthly interest immediately, and banks treat it as higher risk behaviour — repeated overlimit usage can also hurt your credit profile.

What are the Important RBI rules?

As per RBI guidelines in 2025, your bank cannot allow over-limit usage or charge an over-limit fee unless you have enabled that facility. So officially:

• If overlimit is not enabled → transaction should decline
• If you opt-in → bank may allow the payment and then apply the overlimit fee

But where customers get surprised:

Many users think, “I didn’t overspend, I only bought within the limit.” The issue usually happens after the purchase, not during the swipe.

Example: Card limit: ₹50,000, and you buy a Mobile worth ₹49,000. At the time of swipe, it is inside the limit — so the transaction is approved. Later, the bank adds:

• GST on interest/fees
• EMI conversion processing fee
• Annual fee (if charged same cycle)

Now your outstanding may become: ₹49,000 + ₹1,200 processing + ₹236 GST + annual fee, etc. → crosses ₹50,000. You never actually “spent” above the limit, but the charges pushed the balance over the limit. This is what triggers the overlimit condition.

Expert Tip: Always keep at least your 5–10% buffer below your limit. If your limit is ₹50,000, try not to cross about ₹45,000 usage. That small gap protects you from GST, fees, and automatic charges pushing the card over the limit.

Top 10 Bank Credit Cards in India — Overlimit Fee Rules

If you enabled it (many people unknowingly click allow in the app), then these are the typical charges banks apply.

Bank	What the bank actually charges	Minimum you will still pay
HDFC Bank	Around 2.5% of the amount you crossed	₹550 even if excess is small
SBI Card	About 2.5% of overlimit usage	₹600 minimum
ICICI Bank	Roughly 2.5% extra on the crossed amount	₹550 minimum
Axis Bank	Slightly higher, near 3%	₹500 minimum
Kotak Bank	Close to 2.5%	₹500 minimum
RBL Bank	About 2.5%	₹500 minimum
IDFC FIRST Bank	Around 2.5%	₹550 minimum
IndusInd Bank	Around 2.5%	₹500 minimum
YES Bank	Same 2.5%	₹500 minimum
Bank of Baroda	Around 2.5%	₹600 minimum

Note: Also, an additional GST 18% extra is added to all fees above.

Overlimit Facility vs Overlimit Fee on Credit Cards

Many people mix these two. They sound similar, but they are actually different things.

• Overlimit facility → permission
• Overlimit fee → penalty

The facility lets a payment go through even after your limit finishes. The fee is what your bank charges you later because you used more credit than allowed.

1. Quick Comparison:

Point	Overlimit Facility	Overlimit Fee
What it is	A setting that allows spending above your limit (about 10–20%)	A penalty charged after you cross the limit
How it starts	You must manually enable (opt-in) in app or net banking	Automatically applied once limit is crossed
Cost	Free to keep ON	Around 2.5% of excess (min ₹500–₹600) + GST
If turned OFF	Transaction declines	No fee charged
Purpose	Emergency support	Risk control charge

2. The real confusion — Why do banks give a facility if they charge ₹500+?

This is where most customers misunderstand. Banks are not giving an extra free limit. They are giving a backup approval system.

Imagine situations:

• Hospital emergency payment
• Last-minute train/flight ticket
• Fuel when the tank is empty
• Hotel checkout

If your card limit is ₹50,000 and the bill is ₹51,200, without the facility, the machine would say DECLINED. That can be embarrassing or risky. So, your bank allows the transaction to go through. But because you used more credit than sanctioned, the bank treats it as a higher risk and charges the overlimit fee. It is basically a convenience + risk charge, not a reward.

3. Credit score impact

Just enabling the facility does nothing to your score. But using it increases your credit utilization ratio. If it stays high, your score can drop. Credit score rule:

Using more than 30%–40% of your credit limit frequently lowers your score.

If it happens often, lenders may think you depend heavily on credit, and your loan approval chances will be reduced.

How to Avoid Overlimit Fee Completely (Works for any bank in India)

The good thing is — after the RBI rules, you actually have control. If you set the card properly once, you can almost make the overlimit fee impossible.

1. First protection — turn OFF your facility (most important)

Go to your card app → Manage Card or Usage Controls → switch your Overlimit Facility = OFF

Then what happens? If you try to spend beyond the limit, the machine will simply decline. No penalty, no ₹500–₹600 shock fee. This is basically your RBI shield.

2. Never use the full limit (keep a buffer)

Try to use only about 70–80% of your credit limit. Why? Because bank charges come later:

• GST on fees
• EMI processing charge
• annual fee
• Interest posting

You may spend ₹49,000 on a ₹50,000 card, but after charges, your bill becomes ₹50,600, and you didn’t even swipe again. Keep at least ₹2,000–₹5,000 free space.

3. Check unbilled and pending transactions

Inside your app you will see unbilled transactions. They also reduce your available limit even before the statement. Many people ignore this and think the limit is still free. that is when overlimit happens.

4. Pay before a big purchase

You don’t have to wait for the bill date. Before a large purchase:

• First, pay some amount into the card
• Then swipe

Your available credit increases instantl,y and the purchase stays inside the limit.

5. Be careful with EMI conversions

EMI is a common trap. When you convert a purchase to EMI:

• full amount blocks your limit
• plus processing fee
• plus GST

So your available limit drops suddenly even though EMI looks small monthly.

6. Turn on alerts

Enable SMS/app notifications and set a usage alert around 80% limit used.

This warning comes before trouble.
You can stop spending or pay some amount immediately.

7. If you hit the limit often, increase it

If you repeatedly reach the limit, the problem is not spending — the limit is too low. Check for a pre-approved limit increase in your app. A higher limit actually helps your credit score and prevents an overlimit fee.

Can the bank reverse an Overlimit Fee?

Yes — in many cases, Indian banks do reverse your overlimit charge, but you usually have to ask. It is not automatic. Banks call it a goodwill waiver. They are more likely to remove it when the mistake looks accidental, not repeated.

When reversal usually works

• Small crossing: you exceeded only a little (around ₹100–₹500)
• First time: your payment history is clean and bills always paid on time
• Quick action: You paid the excess amount immediately, even before the statement was generated

If you regularly cross the limit every month, then the bank normally refuses.

How to request the reversal

• Step 1 — Call or chat first: Contact your card customer care and clearly say: “Please waive the overlimit charges. This was accidental.” Many times they approve instantly, especially on the first request.
• Step 2 — If they refuse: Send an email to the bank’s grievance/nodal officer and mention that you did not knowingly use overlimit facility or did not consent.
• Step 3 — Last option: If no reply within 30 days, you can complain on the RBI CMS Ombudsman portal. Banks usually respond before it reaches this stage.

If the bank removes the overlimit fee, the 18% GST charged on that fee is also reversed automatically. So your statement adjustment will show full refund, not partial.

Practical tip

Ask for a reversal immediately after you notice the charge instantly before the due date. not after 2–3 months. Banks are far more helpful when the request comes in the same billing cycle.

Additional Queries