What Happens if My Credit Card is Overdrawn? How Can I Avoid It?

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Every credit card comes with a credit limit which refers to the amount the cardholder can spend to the maximum. The credit limit is specified based on the type of credit card and a variety of other factors like the applicants’ location, monthly income, age, repayment history, and more. 

Sometimes when credit card users make high-value purchases while not keeping track of the available credit limit, they overdraw their credit cards. When credit cards users use the available credit limit to the fullest or for a larger amount, it leads to overdrawing of a credit card. 

What are the Impacts of Overdrawing a Credit Card?

  1. Reduction in Credit Score: Overdrawing from your credit card can lead to a reduction in your credit score. The banks and other financial institutions save each credit activity and evaluate the card users’ credit score based on the same. The credit score is based on the card users’ repayment habits and credit management skills. If a card member overuses a credit card, it means they are running short of funds and are more prone to facing financial challenges in future. 
  2. Increased Dues: Overdrawing a credit card can increase the dues and outstanding balance in the credit card account. With such a huge outstanding amount, the card member may face difficulties in their credit card debt settlement. However, if they divide their card outstanding into monthly EMIs, they can easily settle the same. 
  3. High Credit Utilisation: Overdrawing a credit card leads to increased credit utilisation records in the credit report. This impacts the credit history of the credit card user negatively and indicates that they are not financially strong. Cardmembers can request their bank or the credit card lender to increase the credit limit based on their monthly income to avoid such issues. They may need to share their income documents to get such requests approved. 

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What are the Over-Limit Charges on Credit Cards in UAE?

Here is a list of some of the major banks in the UAE along with their over-limit charges on credit cards.

Name of the Bank

Over-Limit Charges

RAKBANK

AED 249 to be paid at the end of the credit card billing cycle if the card member has overdrawn the credit card

Abu Dhabi Commercial Bank

AED 275 to be paid at the end of the credit card billing cycle if the card member has overdrawn the credit card

Dubai Islamic Bank

AED 225 to be paid at the end of the credit card billing cycle if the card member has overdrawn the credit card

Emirates Islamic Bank

AED 200 on every transaction made after exceeding the available credit limit

First Abu Dhabi Bank

AED 288.75 to be paid at the end of the credit card billing cycle if the card member has overdrawn the credit card

Standard Chartered Bank

AED 292.95 to be paid at the end of the credit card billing cycle if the card member has overdrawn the credit card

Emirates National Bank of Dubai

AED 292.95 to be paid at the end of the credit card billing cycle if the card member has overdrawn the credit card

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How to Save Yourself from Overdrawing a Credit Card?

Here are a few effective ways to help a card member avoid paying credit card over-limit fees.

  1. Don’t Opt for Over-Limit Fees: Most banks and credit card lenders enable card members to make over-limit transactions if required. Only after opting in for this option can the card members overdraw their credit card and the lender charge the over-limit fee. If the card member does not activate the over-limit options, their transactions for an exceeded amount will be declined and they will not overuse their credit card.
  2. Know Your Credit Limit: The card members must keep a check on their available credit limit to avoid overusing it. They can simply login to the bank’s online and mobile banking portal to access their credit card details and check the amount of credit limit they are left with. The card members can also check their monthly billing statements to know the available credit limit before making any further purchases. 
  3. Enrol for Balance Alerts: Credit cardholders can also enrol for balance alerts to receive notifications on their registered mobile number for each transaction they make. This helps them keep a close eye on the available credit limit and saves them from exceeding it and paying the over-limit charges. The card members can simply call the concerned bank’s helpdesk or login to their online banking account to activate this service.
  4. Keep Your Balance Low: The card members must pay their credit card bills on time to keep the outstanding balance low. This helps them maintain a good credit score and keep a higher available credit limit. As per a few recent studies, the card members keeping their credit card usage below 30 percent end up having an excellent credit score. Such credit card users are not very much prone to paying the over-limit charges even if they make huge purchases as they have a higher fraction of their credit card limit available.
  5. Track Your Transactions: This is one of the best ways to avoid paying over credit limit charges. The card members can login to their online or mobile banking portal to keep track of all their credit card transactions. This helps them be aware of the available credit limit and enables them to use their credit card accordingly. 
  6. Contact Customer Care, If not Sure: The credit card members who do not have access to the online portals can also contact their bank’s customer service centre to check their available credit limit before making any high-value transaction. 

What To Do If You Are Charged with the Over-Limit Fee?

Here is what you can do if you have been charged with the over-limit fee.

  1. Ask for the Waiver: You can contact your bank’s customer care helpdesk to request a waiver for the over-limit fee added to your monthly bill. The credit cards lenders usually waive off the over-limit charges for the first time. However, if they find you overdrawing your credit card repeatedly, they may not return the charges. Make sure you keep your account in good standing and avoid over-limit charges from being applied on your credit card. 
  2. Pay the Outstanding Balance: Once you have got the over-limit charges removed, you must focus on the credit card debt settlement. Make sure you reduce your outstanding balance and not overdraw your credit card ever again. To avoid spending over the credit limit, you can keep a check on all your credit card transactions and check the available credit limit before making any high-value transaction.

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The Bottom Line

We hope this article helps you in understanding how you can avoid overdrawing your credit card and what to do next if you have already exceeded your available credit limit. Increasing your credit limit can help you in both cases. You can increase your credit limit either on your existing credit cards or by getting a new one.

You can contact the credit card lender to place a request for increasing your credit limit. The lender may need your income documents to increase your credit limit. Additionally, they check your credit report and repayment history to make sure that you pay your debts on time. 

On the other hand, if you want to get a new credit card, the best way is to visit our website and go to the credit cards section to find the best-fit credit card options based on your financial preferences. You can also contact our help and support team in case you need assistance in choosing the best suitable credit card option. Our financial experts not only help you find the best credit card depending upon your needs but also take you through the entire application process and help get the chosen credit card delivered to your doorstep without any hassle.