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When you go over the limit

Q. What happens when I charge my credit card over the limit?

You will be socked with a hefty penalty fee. Over-the-limit fees of $29 and $35 are common.

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Norm Tapper, a Bankrate.com reader in Indiana, was charged a $25 late fee and $25 over-the-limit fee on a Capital One card with a $300 limit.

Issuers point out that fees are spelled out in the credit-card agreement and monthly statements list credit limit, balance information and due dates. But a lot of people are shocked by over-the-limit fees. In fact, most people learn about a card's over-the-limit penalty after they get charged one.

Credit card issuers have two basic choices when a customer makes a purchase that exceeds a credit limit. They can decline the transaction or approve the transaction and charge a fee.

A third option, approve the transaction and automatically lift the credit line, is reserved for the best customers.

Today's issuers are adept at targeting card offers to a customer's specific credit profile and that includes the handling of over-the-limit charges. Issuers decide what customers can go over credit limits and by how much. The last thing an issuer wants to do is decline a card purchase.

So it looks like issuers will continue to charge bigger and bigger fees to customers who outgrow their credit limits. Don't let it happen to you. Here's how:

1. Monitor spending closely.
Keep track of credit card purchases and stay well within your limit. Leave a big enough cushion on your card for large, unexpected expenses. Some consumer experts recommend keeping one credit card cleared for emergencies.

2. Sign up for free e-mail alerts.

Some issuers send e-mail reminders to customers who are nearing credit limits.

3. Make the limit your limit.
Cardholders at Capital One can request that any limit-busting purchase be declined at the point-of-sale. However, most companies refuse to provide this service.

4. Call ahead and get that limit raised.

If you know you're going to go over a credit limit with a purchase, call ahead and request a line increase. Issuers grant increases on a case-by-case basis. It's a worth a shot and it could save you $30.

5. Check out cards from local banks and credit unions.
Penalty fees are much lower, typically $5 to $15, and smaller institutions are much more lenient when it comes to charging them. For example, at Suncoast Schools Federal Credit Union in Tampa, Fla., the $15 over-the-limit fee is not imposed until you exceed the credit line by 8 percent.



-- Posted: Sept. 16, 2002




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