Amex and Discover Eliminate Overlimit Fees

According to a recent post by American Banker, American Express and Discover are eliminating overlimit fees on consumer credit cards.  The is great news for cardholders of those two issuers!  Unfortunately, it also comes at a price as you will soon see.

Card issuers are in business to make money off of lending you money, so you know there has to be a good reason for them to eliminate a source of revenue.  In this case, we can thank the new CARD Act that Congress passed in May, which will require consumers to opt-in before they can exceed their credit limits.  Apparently it is too much of a hassle to get all of their cardholders to opt-in, so these two card issuers decided to eliminate the fees outright.  It will be interesting to see if other card issuers follow suit.

What is the catch?  Expect to see increased fees in other areas to make up for the revenue shortfall.  Right now all credit card issuers are scrambling to add new fees, increase existing fees and in general are bracing for February 2010 when the CARD Act goes into effect.  This includes higher interest rates, increased late payment fees, higher cash withdrawal fees and whatever other fees they can levy.  I’m waiting for the “you paid your balance” fee for those of us who pay off our entire balances each month. (On second thought, forget that, I don’t want to give the card issuers any ideas.)

Another victim is all of those credit card rewards programs we love to take advantage of.  Who doesn’t like to receive rebates, points or miles for the purchases we make?  Get ready, because card issuers are rapidly lowering the boom on all of them.  This bums me out the most personally — I use credit cards to pay for just about everything (always paying them off each month) so for me the rewards were icing on the cake!  The icing is the best part, right?  Now it looks like I’ll have to settle for just plain cake with very little icing.

Congratulations to all of the Amex and Discover credit card holders out there — you have one less fee to worry about!  Now keep an eye on the mailbox because very soon you will learn what losing that fee really cost you.