Should I "Opt-In" or "Opt-Out"?
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|Wed, 12-23-2009 - 10:46am|
Many of us are receiving phone calls or notices from our credit card companies about over limit fees and "opt-in".
What's going on? A lot of new protections for us who have credit cards!
Remember earlier this year the banks were in a downward spiral with the rest of the economy and in response to the financial crisis, Congress enacted several pieces of legislation, including laws to clip the wings of lenders for many of their outrageous charges and rate jacking practices. Rate jacking, lowering credit limits to below the amount you currently owe then hitting you with over limit fees and new interest charges on those fees? All sorts of nasty tricks were pulled by our credit card companies. The 2009 piece of legislation was entitled the "Credit Card Holder’s Bill of Rights", Credit Card Accountability, Responsibility and Disclosure Act (referred to as the CARD Act). This was to help the consumer (you and me). Among other provisions the CARD Act eliminates the flat over limit fee credit card companies charge.
Right now credit card company will slap you with a flat over limit fee for each transaction that puts you over your limit. This fee can be $25 to $39 or more: whatever the credit card company wants to charge.
How this expensive penalty works. Let’s say you make a purchase that puts you over your credit limit by $10. That little $10 will cost you $49: $39 for the over limit fee plus that little $10 charge.
The good news is this comes to a screeching halt in February 2010. Because of the CARD Act, this nasty over limit fee will disappear at the end of February 2010. Unless, of course, you agree to "opt-in"!
A ha! That’s what these "opt-in" phone calls are about.
The phone call I received from one credit card company made it sound like they would decline the purchase that put me even $1 over my limit unless I decided to "opt-in". I was led to believe I would need to "opt-in" should an emergency arise and I must temporarily go over my credit card limit. But if I want to have the ability to go over my limit and "opt-in" an over limit charge would be approved but, of course, would have that over limit fee charge. "No change to your account provisions Ma'am." So what’s the harm?
Trouble is they can still decline a charge to go over your limit whether or not you agree to "opt-in". They always could. In reality the standard practice is to allow a card holder to go over their limit by 10% of their account. So if I have a credit card with a $5,000 limit I will be allowed to go over my limit by $500. That’s what is ordinarily allowed. So deciding to opt-in doesn’t guarantee that you will be allowed to go over your limit. It only gives them the right to sock you with the old over limit fee.
The hope, obviously, is your credit card company will persuade you and me to agree to "opt-in". I am not going to "opt-in".
I hope you think twice before agreeing to "opt-in".
Has anyone been contacted by their credit card company about this "opt-in" feature?