Over-Limit Fee
An over-limit fee is a penalty charged by credit card companies when cardholders’ purchases exceed their credit limit. Previously, credit card companies would decline the transaction if the consumer made a purchase over their limit; however, credit card companies moved to a practice of allowing the transaction to go through but charging a fee. This practice has stopped since the passing of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act in 2009.
Definition: Over-limit fees are penalties charged by credit card companies when cardholders make purchases that exceed their credit limit. Previously, if consumers exceeded their limit, credit card companies would decline the transaction; however, since the passage of the Credit CARD Act of 2009, credit card companies have allowed transactions to go through but charge a fee.
Origin: The concept of over-limit fees originated with the widespread use of credit cards. Initially, credit card companies would simply decline transactions that exceeded the credit limit. However, the Credit CARD Act of 2009 changed this practice, allowing transactions to proceed but imposing an over-limit fee.
Categories and Characteristics: Over-limit fees are typically fixed amounts, varying by credit card company. Key characteristics include: 1. Fixed fees, usually between $25 and $35; 2. Cardholder consent required for over-limit transactions; 3. Potential impact on the cardholder's credit score. The primary application scenario is when cardholders urgently need funds and are willing to pay the extra fee.
Similar Concept Comparison: Over-limit fees are similar to late fees, as both are additional charges by credit card companies. However, late fees are penalties for not making timely payments, while over-limit fees are penalties for exceeding the credit limit.
Specific Cases: Case 1: Xiao Ming has a credit card limit of 5000 yuan but spent 5200 yuan on a purchase. Since he had agreed to over-limit transactions, the credit card company allowed the transaction but charged a 30 yuan over-limit fee. Case 2: Xiao Hong has a credit card limit of 3000 yuan and spent 3100 yuan in an emergency. Although she paid the over-limit fee, this transaction affected her credit score.
Common Questions: 1. Can over-limit fees be avoided? Answer: Yes, by monitoring spending and avoiding exceeding the credit limit. 2. Do over-limit fees affect credit scores? Answer: They can, especially in cases of frequent over-limit transactions.
