Over The Limit Protection – Feb 2010 Law

In February of 2010, new credit card regulations went into effect that were designed to benefit the consumer.  While many of the changes have indeed made it easier for credit card users to avoid going further in debt, it is still important to be your own advocate when using credit.

Change: Over-the-limit Charges

One of the changes involved over-the-limit charges posted to credit card accounts.  This occurred when a transaction was presented for processing through the credit card processing system that did not have sufficient credit to be approved.  Depending on how your credit card account was set up, that transaction may have been approved, despite the lack of credit, resulting in an over-the-limit fee that is automatically posted to your account.  Should you be unaware of how close you are to your credit limit, this could quickly add up to some significant charges.

Today, credit card companies are not permitted to charge over-the-limit fees unless you consent to over-the-limit protection.  While most credit card account holders can see the benefit of not being charged these fees, many have become accustomed to that little cushion of protection that allows transactions that would otherwise be declined to go through the credit card processing system.  Here we look at a few reasons why you should not consider over-the-limit protection.

  • Manage your finances better–  Let’s face it, if you can’t manage to keep your credit card balance below your credit limit, you have bigger issues than worrying about a pesky $39 fee.  If you are considering authorizing your credit card company to charge you for going over your limit, it may be time to focus on some other areas of your personal finances.  Don’t worry, you are not alone, millions of consumers have either gone through or are going through the same shift from overspending to responsible money management.
  • Pay down debt–  If you want to avoid the chance of having your credit card declined and the embarrassment that ensues, you can use this opportunity to pay down your debt, thus avoiding the issue all together.
  • Fees add billions to bank coffers–  You may wonder what the big deal is about a small charge added to your account.  While this fee could add up to billions of dollars for banks each year, imagine what that amount of money could do for the average consumer.  In a day and age when everyone seems to be paying “extra” for any available service, putting more money in your savings account (even $39) per month can make a huge difference in your future finances.

What is the Benefit?

As you can see, the only benefit you will see by opting “in” to over-the-limit protection is avoiding declined credit card transactions.  Clearly this should be a motivating factor to rethink the way you view your credit card and begin a new path toward financial freedom.  It is important to remember that credit cards, nor the credit card processing system get people in debt.  People get themselves in debt.  Avoid falling for tactics that will keep you on the path toward financial insecurity.

Posted on Friday, August 6th, 2010