CapitalOne’s Credit Limit Trap

How Capital One sets a trap with arbitrarily low Credit limits only to charge you fees, all under the guise of being “responsible”

I’ve had quite the unfortunate dealing with CapitalOne’s horrible customer service and policies, which resulted in me closing two Credit Cards I held with them over a simple $39 fine. I’m shocked at CapitalOne’s poor customer service, and that they couldn’t compromise over a simple request to waive this fee for a long-time customer in good standing. In short, I feel strongly that CapitalOne is not worth anyone’s time, as you will be given an absurdly low credit limit with the hope that you’ll go over your limit and be stuck with a fee, along with customer service that treats you like an idiot. Here is my story:

• I have phenomenal credit. I subscribe to Bank of America’s Credit Watching service PrivacyAssist, and at this moment I have between a 735 – 764 credit score and no outstanding loans and have never been late on a payment in my life.

• I had a Capital One Visa with Travel Rewards for 2.5 years. During this time, I always paid in full and on time. I had slowly built up a $13,000 credit limit.

• Due to a change in jobs and lifestyle, I no longer travel as much and signed up for a CapitalOne cash back rewards card as I’d rather have cash back than miles.

• CapitalOne started me off with a $500 credit limit, despite the fact I had over 2 years of history of on-time, in-full payments to them. I argued for a higher credit limit but was told just to hang in there and it would be adjusted eventually.

• 8 months later, still no credit increase. $500 per month is less than half of my monthly credit card spending (I charge everything I buy). The cash rewards are great so I attempt to spend as close to $500 as possible each month, but I accidentally go over by $2.

• CapitalOne does not alert me I go over, and does not deny the charge either, allowing the $2 charge to post and charges me a $39 fee for going over my limit. I find this out when my bill is due, shocked that CapitalOne had processed the charge, assuming the charge would be denied if I was over my limit (What is the point of a limit if you can go over it? Simply to collect fees, it would seem).

• I call CapitalOne to complain. I tell them they are going to lose my business (both cards, over $13500 in potential monthly charges they’d be processing), unless:
o The $39 fee was removed OR
o They increased my Credit Limit to something more acceptable for someone with my credit score, income, and outstanding payment history.

• The CapitalOne rep is unable to do anything, sounding helpless and confused, but said a Manager should be able to help me out. I ask for a manager, and am transferred to a “Senior Account Specialist.”

• This Senior Account Specialist (SAS) treated me like a complete idiot. She was less helpful than the first person, and unwilling to meet either condition for me to keep my accounts (she only needed to do one or the other, a generous offer on my part). Here are some excerpts of what she told me:

Me: Why wasn’t the charge denied? Why didn’t CapitalOne alert me that I was over my limit?

SAS: It’s your responsibility to monitor your spending. We can’t pay someone to stare at your account all day and alert you when you’ve gone over.

Me: Well, you wouldn’t have to pay anyone, you’d just have to program a small alert feature., BankofAmerica, and most other financial institutions do this, it would seem you purposefully don’t tell anyone they’ve gone over their credit limit so you can collect a $39 fee.

Me: If you can’t set an alert to tell me when I’ve gone over my really low Credit limit, then shouldn’t you deny the charge? What is the point of having a Credit limit if I can go over it whenever I want?

SAS: It is your responsibility to monitor your spending. You were not responsible and were charged the fee.

Me: So you’re calling someone that has never missed a payment irresponsible? I think it’s irresponsible that you make it so easy to go over my Credit Limit without warning or notification, just so you can collect a $39 fee.

Me: Look, I like this Credit Card and I want to keep it, but a $500 limit is simply unreasonable. Can you increase it?

SAS: We are a responsible financial institution and have cut back our lending in these economic times [I have heard this boilerplate response about 10 times now, and could probably recite it by heart).

Me: Then why did you give me a Credit Limit of $13,000 on the other card? Was that irresponsible of you?

SAS: We are looking out for your best financial interests and can not raise your credit limit except at designated times. Your account is not selected for review, so we can’t raise the credit limit. It’s for your protection.

Me: I don’t need protected, I need a Credit Card that will cover my expenses. You can’t even review my account and increase the Credit Limit if I threaten to cancel the card?

SAS: No, we can only review it during automated, pre-designated times. [repeat boilerplate about CapitalOne being a responsible lender in bad economy]

Me: I disagree with you being a responsible financial institution. It’s bad business to deny a higher credit limit to someone that is clearly qualified for it, and it’s bad business to argue with a customer and not take care of them. Your business practice of not increasing Credit Limit is losing you customers, which is irresponsible to your shareholders. While it’s a nice talking point, its simply bad business, and I can’t understand why you won’t do anything to keep me as a customer, despite a flawless record and tons of money you’ve made off me. Do you not want my business?

SAS: [repeats boilerplate about CapitalOne being a responsible lender]
In conclusion, I believe CapitalOne INTENTIONALLY sets very low credit limits, then does nothing to alert you that you have gone over your limit in order to charge you an extra $39 fee. Under the guise of being a “responsible financial institution,” they have simply found a way to charge people fees that are 100% profit to them, enticing their customers to deal with the low credit limits by promising their account will be reviewed eventually (read: a very long time from now), and having really good rewards.

It baffles me that a company that gets a few percent of every charge I make would lose my business over a $39 fee. Between my 2 CapitalOne cards, I averaged over $1000 per month in spending. Even if they only get 2% of those charges, that is $20 per month and they’d make up that $39 dollars with just two months more of my business. Instead, they got $39 dollars and no future income from my transactions. Furthermore, they treated me poorly, motivating me to post about my awful experience and encourage all of my friends to avoid CapitalOne. Instead, I will stick with American Express, where the customer is always right, they have account alerts, and they give an acceptable Credit Limit that can be increased. American Express does not set traps for me to go over limit then charge me silly fees. I’ll use my Bank of America debit card everywhere AMEX isn’t accepted, and I’m very happy to be rid of CapitalOne.

Post written by Nick Roshon, executive editor of Nick’s Car Blog.