An over-limit fee is an amount tacked on to monthly credit card finance charges as a penalty for charging an amount above one’s stipulated credit limit ceiling. Most credit card accounts come with a pre-assigned limit that takes into consideration a customer’s prior credit history and rating. This limits potential losses for the issuer and ensures customers will not become over-extended and unable to keep up with payments.
The over-limit fee is a punishment ostensibly intended to keep cardholders’ accounts at a reasonable level, although banks may have an interest in customer’s over-extending as they stand to make a profit off of them. As an example, a card that has a preset limit of $3,000 will trigger an over-limit fee of $39 or more if a customer charges $3000.01, amounting to a nice interest rate of 3900% on that penny.
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