Any credit cards that won't let you go over your limit?
My credit card company has this language in the agreement:
You must keep your Account balance below your Account credit line.
If you do not, we may request immediate payment of the amount by which you exceed it.
Is this standard practice? How is a credit limit a limit if you can go over it? I’m thinking about trying to find a different card which will simply decline all purchases that would put me over the limit, but before I get too far into my search I want to know if such a thing even exists. Is it possible? If not, how can one put a hard limit on how much indebtedness that can be incurred in their name?
The credit card system is old and highly distributed. Not all card terminals are on-line. Not all card terminals are even electronic. So it is virtually impossible for them to precisely enforce a limit.
In some countries there exist debit cards that only allow electronic processing with on-line validation (in the UK these are known as “solo” and “electron” cards) but I have never seen this for a credit card. If the bank trusts you enough to lend you money they trust you enough to use a payment system where they can only approximately enforce the limits.
Suppose you made a purchase from a merchant with an old-fashioned credit-card machine, that doesn’t check your balance on-line in real time. The merchant could thus accept your card in good faith, even though the purchase put you over the limit.
I don’t know whether any of these still exist, but I suspect the language in the agreement is boilerplate left over from when they were more common.
Simple — below the limit, you are guaranteed that transaction will succeed. Above the limit, it’s possible that the transaction will succeed, or it may be declined. There is no guarantee. It may depend on your bank, the amount it goes over, and other factors.
I’ve gone over the limit many times; I know the bank can’t charge me a fee for it because I have not opted in to the feature. The bank is free to decline it, but if they don’t (and they often don’t), then it’s good.
Before the Credit Card Act of 2009, it used to be common practice to allow consumers to go over their credit limit. This allowed banks to:
Typically, the over limit fee became active when your statement balance exceeded the credit limit after the statement cycle closes. If your payment posted before the statement cycle ended, the fee would not be charged.
As the link above states, the over limit feature is now opt-in to avoid having to pay an over-limit fee.
Ask for clarification on how the over-limit feature works with your specific credit card. Banks require opt-in, but they can still increase your credit limit temporary or permanently without charging you a fee. The Credit Card Act of 2009 does not cover every possible scenario, especially edge cases.
Source: http://www.gpo.gov/fdsys/pkg/STATUTE-123/pdf/STATUTE-123-Pg1734.pdf