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.