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CandleFocus Glossary Editor
Over-limit fees are charges that credit card companies impose when a customer exceeds their credit limits. The fees typically vary depending on what financial institution you are using and how much you have gone over your limit; some range from $35 to $47. A credit card company may waive an over-limit fee at their discretion, but this is becoming less common as cardholders put greater demands on them.
Before the passage of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act in 2009, over-limit fees would often be used as a way for card providers to capitalize on inattentive or naive customers. Additionally, different companies had different policies in terms of size of the fee, with some charging higher fees than others. This led to large disparities in the cost of using credit at different institutions.
However, the CARD Act put a stop to these practices, putting a cap on how much card providers could charge customers for going over-limit. This limit is at the amount that is exceeded. For instance, if you went over your limit by $30, the maximum you could be charged is $30. What this means is that customers are now assured of a fair and consistent fee when they go over limit, no matter where they are obtaining their card.
In addition to putting a cap on the size of an over-limit fee, the CARD Act also made it so that cardholders must make the decision to “opt-in” to being charged for exceeding the limit. This means that a customer must actively decide to allow his or her card provider to charge for going over their limit. Without this opt-in, even if a customer goes over the limit, no charge would be levied.
In conclusion, over-limit fees have become much less prevalent since the passage of the CARD Act. Though they occur less frequently, cardholders should still be aware of the potential fees they could be charged if they ever go over their credit limits. Knowing how much a card provider might charge, as well as understanding the opt-in requirement, can help customers manage their spending and keep their finances in check.
Before the passage of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act in 2009, over-limit fees would often be used as a way for card providers to capitalize on inattentive or naive customers. Additionally, different companies had different policies in terms of size of the fee, with some charging higher fees than others. This led to large disparities in the cost of using credit at different institutions.
However, the CARD Act put a stop to these practices, putting a cap on how much card providers could charge customers for going over-limit. This limit is at the amount that is exceeded. For instance, if you went over your limit by $30, the maximum you could be charged is $30. What this means is that customers are now assured of a fair and consistent fee when they go over limit, no matter where they are obtaining their card.
In addition to putting a cap on the size of an over-limit fee, the CARD Act also made it so that cardholders must make the decision to “opt-in” to being charged for exceeding the limit. This means that a customer must actively decide to allow his or her card provider to charge for going over their limit. Without this opt-in, even if a customer goes over the limit, no charge would be levied.
In conclusion, over-limit fees have become much less prevalent since the passage of the CARD Act. Though they occur less frequently, cardholders should still be aware of the potential fees they could be charged if they ever go over their credit limits. Knowing how much a card provider might charge, as well as understanding the opt-in requirement, can help customers manage their spending and keep their finances in check.