What Is Max Overlimit Fee?

When you reach the limitations of your credit card, there are a few things that can happen. Your card could be declined for insufficient funds or you could be assessed an overlimit fee. In some cases, this could occur for each time you charge over your limit unless your card has a max overlimit fee.

If your card has a max overlimit fee, you can breathe a little easier because it will prevent excessive charges to your card if you go over your limit. Basically, it will only allow your credit card company to charge a set amount of fees as a penalty as opposed to charging you each time you overdraw. Generally, this is one fee per billing cycle.

Among the fees that your credit card company could charge you, the max overlimit fee is one of the more desirable ones. It prevents the excessive charging of additional fees to your card just in case you go over your limit.

Overlimit fees generate hundreds of millions of dollars in income for credit card companies every year. Unfortunately this comes at great expense to consumers. New laws, however, serve to institute a new provision that sets a limit to the amount of times a consumer can be charged for going over the limit, even if that consumer is aware of their credit limit. There are a couple different options that credit card companies have when it comes to overlimit fees:

• Consumer and student cards are "opt-in" which is an option left open to the consumer
• Small business credit cards might have an automatic overlimit fee assessed
• In some cases, overlimit fees can be "tiered"

Opt-In

While credit card companies were at one point able to automatically charge these fees, they must now give the consumer an option to "opt-in" for the charges. Although you might think that no one would ever want to accept the option of being charged overlimit fees, this is one way that credit card companies can continue to charge the fee; otherwise they would have to get rid of the fee altogether. If you do not opt-in for the feature then your card will be denied if you hit your credit limit.

It is important to remember that you could be charged an NSF fee if you try to use your card even though it has reached its limit. At the same time, some people would rather pay the overlimit fee than be embarrassed by a declined charge at the register.

Overlimit Tiers

Some credit cards with applicable overlimit fees operate on a tier schedule. Basically, this just says that the issuer of the credit card is only able to charge a set variable amount of money that is dependent on the total amount of credit charged to the card. Therefore the higher your credit limit is, the higher your potential overlimit fee might be.

Why Max Overlimit

Because credit card companies can still charge this fee, it is also important that the charges do not get out of hand; after all, these provisions are designed to protect consumers. For this reason, the overlimit fee is used as a deterrent from overextending your credit. By establishing a maximum overlimit fee, consumers know what to expect in the event that they charge over their limit and credit card companies are able to continue to stay in business.

Conclusion

The Max Overlimit Fee is designed by credit card companies to prevent consumers from charging more than their maximum credit limit. They also provide credit card issuers a means for making money if they honor charges that exceed credit limits.