How your credit card get overdrawn?

It is a known fact that every credit card comes with a “credit limit”.It the amount you can owe on a credit card. The limit on your credit card depends up on your credit card type that bank offers you, based on your creditworthiness and income you show.

Have you ever wondered what happens when you cross your credit limit or make a big purchase that exceeds your credit limit? Do bank provides an option to exceed the limit? The answer is no. Unlike a bank account, there is no  “overdraft facility” on your credit card.

 

overdrawn credit card overlimit fees

overdrawn credit card overlimit fees

Can you exceed your limit on your credit card?

If you exceed your limit without any prior confirmation, you may not embarrass of having declined your credit card. Being said, there are few banks in UAE that let their customers exceed their credit limit up to a certain point.

However, some of these banks set the upper limit of overdrawing at 5% of the existing limit.

These may be the reasons that you overdraw on your credit card.

You are ought to make a bigger purchase or performed other transaction that let you exceed your credit card limit.

In the UAE, Banks have different rules on the overdrawn credit card account. While some of the banks said that this 5% over the limit facility is offered to all customers. And some said that it would be decided on a case to case basis at the bank’s discretion. The bank takes many factors into the account like your creditworthiness, your income, how timely your payments for previous credit card bills were and how often you exceed the limit set for you.

But major banks will decline your credit card when you use beyond its limit in any case.

Tip : If you perform transactions up to your 100% credit limit, make an immediate payment of atleast 10% amount, if you failed to make that payment, on your statement date;  interest, Emis and other charges will be added to your balance and that will take your account over limit.

Over limit charges

What is an over-limit fee on a credit card?

credit card over-limit fee is a penalty charged when you exceed the maximum balance, or limit, on your credit card. This fee is added to the balance that you must repay to your credit card company.

Your credit card will not be spared if you overdraw on it without paying over-limit charges. Many credit card issuers will offer this option but using it often lead to hurt your credit score that is not good for your financial life. You can opt this over limit o transactions at any time(when you need it).

Here’s a List of Overlimit fees charged by different banks in UAE :

Bank Name Overlimit fees
Emirates Islamic Bank AED 200 for each transaction that is above your credit limit.
ADCB AED 275 payable as a fee at the end of your billing cycle if you are overdrawn.
RAKBANK AED 249 payable as a fee at the end of your billing cycle if you are overdrawn.
Dubai Islamic Bank AED 225 payable as a fee at the end of your billing cycle if you are overdrawn.

Impact of Going Over on Your Credit Limit 

An over the limit on credit card account probably show some impact on your credit report. This will hurt your credit score. An over-the-limit credit card balance increases your credit utilization and could lower your credit score. You cant avoid d having the high utilization reported to AI Etihad credit bureau if you fail to pay your balance down before your account statement closes.

If you frequently overdraw your credit card limit could signal to your provider an inability to properly handle the credit that has been extended to you. Your bank will view you as a risk and may decline your credit card.

 So it is better to not use more than your credit limit. If you want to make a big purchase that would exceed your available credit, first ask your credit card issuer for a credit limit increase.