Few things are more awkward than walking up to a register to pay for items and have your credit card declined. The sales associate has to delicately inform you that it happened, and you must figure out what to do next. On a positive note, no one is going to charge you a fee if your credit card is declined. However, if you've opted into a program that allows credit card charges to be honored for a fee, you might feel the financial sting of that when you receive your next statement.
Many individuals have experienced the uncomfortable scenario when their credit card is declined during a purchase. Although your card may be declined for a variety of reasons, you can rest assured that the merchant you are purchasing from will not charge a fee due to card issues. That being said, your bank may charge a fee if you have entered into an agreement in which over-limit charges can still be accepted.
Why Cards Are Declined
Credit cards will decline for several reasons. The most obvious is if the charge would put the card over its available credit limit. Another reason could be an information mismatch. For example, you transposed your card number on an online transaction, or you moved and forgot to update your address with the credit card company. Even a purchase deemed outside your norms, such as plane tickets or an expensive piece of jewelry, can trigger a denial. In some of these instances, a call to your credit card company can resolve the issue and the transaction will be approved. But if you are over your limit or you've had late or missed payments, then you might have to pay down your card balance or make timely payments before more charges are allowed. That said, none of these situations will result in you being charged a fee when the card is declined.
Merchants Don't Charge Over-Limit Fees
If your credit card is declined when you attempt to make a purchase, businesses do not charge a fee. You can use an alternate form of payment, or you won't receive the items. Most online merchants operate in the same fashion. If the transaction does not go through, your items are not shipped.
Understanding Over-Limit Charges
Similar to the overdraft protection banks offer customers for their checking accounts, your credit card company might offer over-the-limit protection. This program gives the credit card company discretion to let charges that otherwise would decline go through, but a fee is assessed for each transaction it allows. For example, you're traveling and you blow a tire and bend your rim. The new tire and rim cost $500, but you only have $350 on your credit card. If you don't have the over-the-limit protection, the charge is declined, but with the protection, the charge is allowed and you can get your vehicle repaired. In exchange for letting the charge go through, the credit card company can charge you an over-the-limit fee. The amount varies by company but generally, it's between $25 and $40 per allowed transaction. Just like overdraft protection, you have to opt-in to have over-the-limit protection and agree to the fee that accompanies its use.
- Bankrate: Credit card declined? Top reasons credit cards are declined
- Control: Responding to Customer’s Failed Charges or Declines
- Consumer Financial Protection Bureau. "Requirements for Over-the-Limit Transactions." Accessed Jun 18, 2020.
- Experian. "What is a Credit Utilization Rate?" Accessed June 18, 2020.
- Experian. "What Is a Penalty APR?" Accessed June 18, 2020.
- Consumer Financial Protection Bureau. "Why Did My Credit Card Issuer Increase My Late Payment Fee?" Accessed June 18, 2020.
- Consumer Financial Protection Bureau. "Can My Credit Card Company Charge a Fee Based on How I Paid My Bill, Such as for Making a Payment Over the Phone?" Accessed June 18, 2020.
K.A. Francis has been a freelance and small business owner for 20 years. She has been writing about personal finance and budgeting since 2008. She taught Accounting, Management, Marketing and Business Law at WV Business College and Belmont College and holds a BA and an MAED in Education and Training.