Now I have a credit card question. I would call Discover but can't at the moment. Being a new custom, my credit limit is only $500--which is fine. However, my available credit OFTEN goes negative! Some transactions are not allowed because of insufficient credit. However, this most recent order (the PCI card) will put me $52 over my credit limit and it appears to have gone through! My credit is -$52 and Buy.com doesn't give an error. It appears to have gone through. I will make a payment to Discover today to get everything back to normal but I'm confused. They said if finance charges (for instance) take you over your credit limit, you can be charged fines. They better not try to charge fines for accepting too many transactions! (Off-topic)
Conveniently, I used to work (many moons ago) for MBNA (Money Buys Nearly Anything) as a customer service rep, and I can answer this...
Generally, banks use a computer modeling system to determine whether to allow Over-Limit charges to go through. In most cases, MBNA would approve over-limit charges, if the amount that it would push the customer over limit was less than $100, and if the customer had a reasonably good payment record (no 30-day delinquencies and whatnot). There was a complex formula that would tell the system to approve or deny them, but that was a general good "guestimate" rule. Some accounts they'd let go $1000s overlimit!
They always tried to balance the bank's interest in preventing over-limit expenditures (which increase risk to the bank), with customer satisfaction (denying charges makes customers very mad no matter who's "fault" it is). Plus, generally, the higher your balance is the better it is for the bank (more debt = higher interest payments), so the bank has a good motivation to approve all potential purchases. Plus, there's the advantage to the bank that they then get to charge you the overlimit fee (though MBNA only charged the fee if you were overlimit on your statement closing date -- some banks charge it if you went over at any point during the month, and I don't know Citibank's, who owns Discover, rule). Fees like that are pure profit for the bank, so they like charging them.
Those same models are actually how they decide to approve or deny all charges. The credit limit is a figure for the customer to worry about, it doesn't have much to do with how the bank decides to approve or deny charges. Those modeling systems are used to predict charge-off and fraud and all sorts of other nasties...
Dirty little secret of the credit card industry is that they like it when you're late. Just so long as you're not
too late
too often. A customer who always pays their bills on time, and always pays in full, really isn't that great of a customer. Sure, they're low risk, but they're also very low profit!
It used to always make me laugh... People would call about some charge for some reason or another, and they'd demand: "I'm an excellent customer! I always pay my bill on time, and I always pay in full!" And I'd be thinking ... "Yeah, we know. It sucks!"
