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One
of the most troublesome credit card fees that you can run up against
is the over-the-limit credit card fee. Unlike most other credit card
fees where you pay one time for the offense, after you breach your
limit, you can end up paying this fee month-in and month-out. Once
you exceed your credit card limit, the over-the-limit fee is an
automatic, computer-generated fee that will be applied to every
statement until you bring your credit card balance below your
limit. While these fees typically range between $25 and $35, they
can be as high as $40, which means you will be paying $300 - $500 a
year for this fee all by itself.
This fee comes into play when you try
to make a purchase that is over the limit that has been set on your
credit card. When this happens, the credit card issuer has three
choices:
1) Decline The Transaction
This is
the least desirable choice for them because they lose money on the
sale, but if they feel that you have exceeded your credit by
too much and are a high risk not to pay, they will do this.
2) Approve The Transaction &
Charge An Over-The-Limit Fee
This is the most profitable option for
them and the most likely course of action they will take. They
receive the money from the sale of the item, charge a hefty fee to
you (and continue to do so as long as you are over your limit) and
most likely raise your credit card interest rate in the process.
3) Approve The Transaction &
Raise Your Credit Card Limit
This is something that is reserved for
their best customers and not likely to be done unless there are
special circumstances or if you request it to happen directly.
The best defense against this fee is
to prevent it from ever coming into play. Here are some steps you
can take to keep this fee from ever becoming an issue as well as
reducing it as much as possible if it does become one:
1) Know Your Limit
By simply knowing
what your credit card limit is and keeping track of your credit card
purchases, you can make sure you're always well below your limit.
It's important to have a cushion on your card for any large,
unexpected expenses.
2) Have An Emergency Credit Card
The
main reason that people breach their credit card limit is due to an
unexpected emergency. To avoid this from happening, keep an extra
credit card tucked in the back of a drawer that is used solely for
emergencies.
3) Request An Alert
Check with your
credit card issuer to see if they provide alerts when you come close
to your credit card limit. Some do and this reminder can keep you
from accidentally going over your limit.
4) Raise Your Limit
If you are
coming near your limit, call your credit card company and request a
credit line increase.
5) Get A Credit Union Credit Card
When getting a credit card, get one affiliated with a credit union
or a local bank. They are much more likely to charge less for an
over-the-limit fee and much more understanding in trying to get the
fee waived.
If you have already exceeded your
limit and are paying the over limit fee, consider taking the
following actions:
1) Get Below Your Limit
Although
this seems obvious, if you have extra money in a savings account,
use that money to get under your limit. The over-the-limit fee in
itself will likely be far more than any interest you would earn on
your savings.
2) Raise Your Limit
Call your credit
card company and ask to have your fee waived and your credit limit
raised. Ask to talk to a manager and mention that you have balance
transfer offers if they will not do this for you.
3) Consider A Balance Transfer
If
you can't get the fee waived and your credit line raised, consider a
balance transfer to another credit card. A full amount transfer is
fine, but it doesn't have to be for the full amount if you can't
find another credit card to take the full amount. Transferring an
amount that will get you under the over-the-limit fee is better than
nothing.
--End--
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