credit cards

Death of overlimit fees?

Thursday, March 11
Posted: 8 a.m.

One benefit -- or drawback, depending on your credit habits -- of the new credit card law that went into effect on Feb. 22, 2010, is that an increasing number of issuers are dumping overlimit fees from their consumer cards, according to Bankrate.com's weekly credit card survey. Last week, five abandoned the fee, followed by four this week. Only 16 out of the top 50 issuers we survey still list such a fee.

What appears to be a goodwill move isn't in the context of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. The law prohibits issuers from charging an overlimit fee without getting prior consent from the customer to do so. In addition, severe restrictions on penalty fees may apply come August 2010, when the last round of CARD Act provisions takes effect. A proposed rule introduced by the Federal Reserve Board last week would prevent credit card providers from assessing a penalty fee greater than the dollar amount associated with the offense. For example, if a person went over the limit by $10, the fee couldn't exceed $10.

So, not only would issuers have to get permission to charge a fee, the fee itself may be limited. Rather than track opt-ins and rely on the amount of the offending transaction, some issuers are simply doing away with the fee.

Last fall, American Express and Discover Financial Services became the first two major companies to shed their overlimit fees. At the time, the majority of card issuers penalized customers that exceeded the limit. A July 2009 study from the Pew Safe Credit Cards Project found that 81 percent of credit card issuers would apply the penalty fee.

What it means

Credit card issuers that no longer use overlimit fees may or may not approve transactions that push the balance above the limit. Make sure to carry around more than one source of payment if you tend to charge up your credit card.

In addition to reading announcements from card issuers about fee adjustments, check your account limits each month. They can change without advance notice.

Questions? Comments? E-mail plastic_rap@bankrate.com.

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