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AmEx, Discover end overlimit fee

Friday, Aug. 14
Posted 8 a.m. EDT

Bankrate reporter Leslie McFadden contributed this entry.

Discover Financial Services and American Express will soon stop charging overlimit fees for transactions that exceed the credit limit. Overlimit transactions will be approved on a case-by-case basis.

The decision, reported by American Banker on Monday, comes just months before new credit card regulations are implemented that would restrict overlimit fees. The Credit Card Accountability, Responsibility and Disclosure Act prohibits the application of an overlimit fee unless the consumer has opted in to allow overlimit transactions. Issuers would be limited to charging only one overlimit fee per billing cycle, as opposed to a penalty fee for each offending transaction. Most of the provisions in the CARD Act take effect in February, including the overlimit rules.

American Express spokeswoman Desiree Fish explained that the company doesn't rely on overlimit fees as a revenue source, and that "continuing to offer them for those who opt in would have been more expensive than eliminating them altogether."

Discover spokeswoman Laura Gingiss didn't mention cost, saying only that "a number of factors, including the implications to our cardmembers, our brand and our business," played into the decision to drop the fee from consumer cards.

This move should encourage no one to exceed their limit. Breaching your card limit does serious damage to your credit score and leaves you with no available credit for emergencies.

Currently, American Express imposes a $35 penalty for overlimit charges on most of its consumer credit cards, and a $29 fee on some co-branded cards. The fee will disappear starting Oct. 1.

Discover charges $15 for over-the-limit transactions when the balance is $500 or less and $39 on balances above that amount. Gingiss said the effective date "will be communicated to cardmembers soon."

In October, American Express will increase APRs for some customers holding Blue or Optima cards by an average of 4 percentage points. Some customers with co-branded cards will also see their rate rise, by an average of 2 percentage points. The cash advance rate will go up 4 percent to prime plus 21.99 percent.

Discover made no other simultaneous changes to fees.

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