CARD Tricks

As predicted, the cat and mouse game that is CARD Act compliance just took a new turn.    It seems that some Capitol One cardholders are receiving an interesting proposition.

You Have The Right To Remain Compliant.   If You Choose To Give Up That Right……

One of the provisions of the CARD act is that banks will no longer be able to approve transaction that are over your credit limit, only to charge you “over the limit” fees.   Actually, the law specifies that you must choose to allow these fees.    The theory behind these fees, as told by the credit card companies, is that you would much rather get a $39 “over the limit” fee than have a charge denied.   Presumably, the emotional damage from that denial will cause lifelong psychological issues for you that make the $39 fee worth it for your coffee charge to go through.     To most consumers, this is a great way for credit card companies to gouge you by approving an over the limit transaction, and then slapping a huge charge on to it.

Capitol One’s pitch, as described at this post on The Consumerist, is to get you to opt in to them being able to approve over the limit charges by giving you something in return.  What are they giving you?   They are generously offering to reduce their over the limit fee from $39 to $29.     It’s like the mob saying “we ain’t allowed to break your legs no more, but if it’s OK with you, we’ll just smash your toes.”

Needless to say, I do not advise anyone to give up their rights under the CARD act.    If you bump up against your limit, you should have your charge declined.    It is no big deal.   I get charges declined from time to time.   It is almost always because a merchant is running my card incorrectly, or some other technical glitch.   Somehow I manage to go on.

What To Do If You Are At Or Near Your Limit

At the risk of stating the obvious, call the credit card company up and ask for your limit to be raised.   If you have a good payment history, and haven’t had your limit raised recently, you will probably get an immediate answer.   The worst they can say is no.    Another important thing to remember is that you should never have a single credit card.    There are many reasons for this, and in fact your credit score will be higher if you have five credit cards than if you have only one or two.     One of the big reasons for this is that you can always use another credit card if you max one out.     If you need more credit, it you can also appeal to multiple companies if you have multiple cards.

When Have I Ever Maxed Out A Card?

Those of you who read this page regularly know that I only use credit cards as method of payment, not a means of finance.    That is another way of saying that I never carry a balance.   I always pay my entire balance in full every month.    That said, I can remember a couple of times that I needed a balance increase.    Early in my career, I traveled a lot for business.    I could easily incur thousands of dollars a week in airfare and other travel expenses.   My company would promptly reimburse me, and I would pay off the balance in full when the bill would come due.   That meant that I might have up to a $15,000 balance at the time my payment was due.   This was far more than I could imagine in personal expenses.    Thankfully, my credit card  company had no problem increasing my credit limit to accommodate me.   Three years ago, I sold my condo and bought a 70 year old house.   I took some of the proceeds from the condo sale to use to renovate the house.    I spent tens of thousands of dollars in a very short time period.    As usual, I charged everything to my credit card, and paid it all off in full, yet I also required a credit limit increase to handle that project.    If I were to graph out my expenses, the resulting line would resemble a python eating a large mammal!

In Conclusion

Don’t be fooled into giving up your rights under the CARD Act.   Over the limit fees are a egregious rip off, and that is why they will soon be illegal.    Somehow, the banks got Congress to grant them a loophole for suckers.      Don’t be one of those suckers.    There are many, many good options to paying an “over the limit” fee.