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.


Debt Payments

The other day I read in a magazine that the average American under the age of 35 spends roughly 20 cents of every dollar they earn to make payments on debt. That means that 20% of every dollar they make is already spent. That is bad. I started thinking that this probably won’t get any better because people are making less and less money during these hard times. Plus, credit card companies are raising their rates and fees for many of their card members.

Try not to use your credit card unless you know you will pay it off at the end of the month. If you do have credit card debt, pay down the debt as much as you are able, even if it means paying just $10 towards the principal each month. That will allow you to get out of debt faster and become financially free faster, too. When you’re debt-free every dollar you earn will be 100% yours.

Credit card tips

Card limits shrinking
Have you noticed lately that many credit card companies are starting to lower limits to customers?  They must be filling the pinch.  Some companies are just doing it over night and before you know it your card may be declined when you go to make a purchase.  All that is happening is that credit card companies are trying to manage their risk.  For the last few years it has been a joy ride so they decided they were going to tighten the rope a little.  If you noticed that your card limit has been reduced, reach out to your credit card company and ask them why it was reduced. 

Credit Card TipsWhat is the right credit card for you?
If you have been a reader of my blog you know that I think credit cards are for people who are going to be responsible.  If you need a new card, here is a cool site that could be very useful when you are going to get one.  It is called Low Cards and it allows you to compare rates, rewards, rebates, and so much more with over 1,000 credit cards out there.  I try to avoid ones with annual fees and go after free ones that offer me cash back and gift cards.

Build your credit

Your credit score is calculated by you paying your bills on time, and how much of the available credit you are using.  There are many other factors, but the most important is to always pay your bills on time.  If you do not have any credit and want to establish some, get a credit card and just buy your gas with it.  Each month make sure you pay it off in full.  Pay your bills on time and your credit should be established and very good.  Each year you can get credit reports online, by multiple companies.

Personal credit maxed out

I watched a documentary last night called “Maxed Out“.  A co-worker of mine gave it to me to watch.  It was a good documentary about personal finance, but at the same time it was pretty sad.  This show was about people who are completely “maxed out” on their own personal credit. 

Some people have paid interest for 20 years and for some reason still can’t get caught up.  It also goes on to show all the people out their how they keep spending and buy stuff that they can’t afford using their credit cards.  It was a good eye opening story of people all over the United States who are hurting because they never understood how their credit cards worked and credit in general.  This documentary talks about real estate, credit cards, foreclosures, bankruptcy, credit collectors, and so much more. 

I would encourage people to watch it just to see what is going on in the world.  After watching this flick it makes me realize that I need to be even more careful in the financial decisions that I make.