Avoiding The Credit Card Over-The-Limit Fee
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 your 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 and 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 over 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 there 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 requests 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.
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