Devil505 wrote:How about 2 simple law changes for starters Paul:
1. CC Companies will be required to simply refuse to authorize a purchsae that exceeds a customer's credit limit. (no fees, no penalties...just refuse authorization in the first place)
2. The application of any fees or penalties to an account, will not be allowed to push a customer over his/her credit limit allowing for the application of an "over limit" charge.
I'm down with #1, but I'm against #2.
And I'm not convinced #1 isn't already being done. I've never had a purchase that would put me over limit at that time be allowed. If they didn't do this then no one would ever be denied a charge, which happens all the time (it is the stuff of embarrassing moments in romantic comedies and sitcoms!). Isn't this the case for all credit cards and companies? They deny new charges that would put you over the limit at the time of the purchase. It was my understanding that people go over limit (assuming no penalties or late charges) by both running a previous month unpaid balance that's accruing interest and making a new purchase that itself doesn't put the card over limit at the time, but at some point between the purchase and the end of the billing cycle the daily interest charges put the account over the limit. In this way it isn't the new purchase that causes the overlimit, but rather the daily accrued interest after the purchase that does it.
An example to clarify what I'm talking about:
If I had a $500 outstanding balance from last month, then go buy a $4400 item, putting me still under the $5000 credit limit of the card, and then wait until the billing cycle to end before making a payment, at which point the interest has put me over the limit... what the hell can anyone do to prevent this? This is an extreme example to demonstrate the mechanics of going over limit without ever making a purchase to cause it to go over limit, but all the other examples are just different in terms of the balance between prior balance vs new purchases. At which point should the government tell CC companies to prevent the new purchase that is still under limit?
I think what you are really wanting to be the new law for #1 is not to merely to prevent new purchases that would put one over limit at the time of the purchase (and I said, I believe this is already done), but rather deny new charges that when added to both the existing balance and the interest that will accrue on the prior balance through the end of the current billing period, would put the card over limit in the future before the end of the billing cycle.
Of course, that doesn't quite protect the credit card holder from himself enough because we have to consider that the billing cycle ends well before the payment for the cycle is due (usually 2-3 weeks). If we go with the above purchase denial rule, the card can still go over limit in the period between the bill being sent out and the bill being paid, making for an unexpected surprise on the next bill. So in fact, you want to make sure that no new charges are accepted that would put us over limit when combined with existing balance and interest that will accrue through the end of the current billing cycle and the time allowed for payment of the bill.
In either case, I'm against that level of protection and regulation. If it isn't already a regulation, fine, I'm down with making sure companies deny charges that, at the time of the purchase, will put the card over limit. I think this is already the case though, or at least a predominant practice within the industry.