credit cards

Hefty cost of going over the limit

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.

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.

When you're charged

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 which customers can go over credit limits and by how much. The last thing an issuer wants to do is decline a card purchase.

Credit card limit
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:
5 ways to avoid exceeding limit
  1. Monitor spending closely.
  2. Sign up for free e-mail alerts.
  3. Make the limit your limit.
  4. Call ahead and get that limit raised.
  5. Check out cards from local banks and credit unions.

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 of your credit cards 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.

Card holders 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 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.

 

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