I just read an interesting article on American Banker called "Law Hits Home as Cards Opt Out of Overlimit Fees." It highlights the move of American Express and Discover to eliminate the practice of assessing over limit fees on their consumer credit cards early.
This may be good news for consumers. Maybe...
This fee ditching move comes in response to the The Credit CARD Act (Credit Card Accountability, Responsibility and Disclosure Act) signed into law by President Obama earlier this year in May.
The law requires that by February, 2010 (among several other requirements), credit card companies must have consumers "opt-in" to over-the-limit transactions if they are going to assess over limit fees.
As credit card companies claim over limit fees don't generate as much profit for them as other fees or areas of their business, complying with the new opt-in requirement to assess over limit fees may be more of a burden than a profit center.
So in response, we see credit card companies like American Express and Discover as the first to just eliminate the fee, and the hassle that comes with being able to charge it, all together.
But in exchange, we also see them raising interest rates and other fees to make up for the loss, and to compensate for the stricter requirements coming down the pipeline as a result of The Credit CARD Act of 2009.
And I bet you 10-to-1, that if credit card companies can't easily charge you an over-the-limit fee, you will not be able to charge over your credit limit as easily as before either (not that it was ever that easy in the first place).
American Express will eliminate the over limit fee on their consumer credit cards beginning October 1, 2009.
Discover hasn't announced a definite date when they will eliminate the fee, but said it will be "soon."
Well soon enough, all credit card companies will be required to have us opt-in to over-the-limit transactions and thus, over limit fees; or, they'll end up eliminating the fee all together just as American Express and Discover has done.
And although it's never a good practice to spend over your credit limit, at least this is one less "fee" consumers will have to worry about being hit with...for now.