You might have wondered why, when you make ATM withdrawals or debit purchases that are higher than your available balance in the bank, the transaction goes through.
It might seem like the bank is playing the fool but, in reality, this practice is the direct result of banks wising up over the years. In the past, banks would most likely have cut you off if you overdrew your account. Nowadays, they let it through because they've learned that they can earn more by charging you special fees for overdrawing your account.
The same also goes when you go over you credit card limit. If you go over the limit of your card, your bank will allow it but you will then be charged a fee for it.
Minimum Amounts and Surcharges
In your purchasing experience, you may have encountered merchants who specifically require a minimum amount before they allow you to use your credit card. Some merchants also have surcharges if your purchase amount is below a specified value.
These are actually not rules from the credit companies and these merchants may actually be breaking the rules. Major credit companies such as MasterCard and Visa don't allow requiring a minimum amount from cardholders. They also don't allow surcharging, though there are exceptions with government and educational institutions. Most merchants may not be aware of these rules, however. They usually get their card terminals from third parties. They are, however, aware that they pay increasingly higher percentage of purchases as the transaction amount gets lower. Thus, they invent lower limits for credit card purchases or add surcharges.
0% balance-transfers seem to be the perfect solution to handling your debt problems. It's quite simple. If you have a debt in a credit card line with XX% interest rates, you move it to a card that is offering a 0% interest rate for a limited time, usually 12 months. The question is; how does the bank see profit?
First off, just by transferring the amount, you will already pay a fee. Then, after you transfer, you miss a single payment and that 0% interest rate jumps to 20% or more. You might also go over the 12-month limit and then you'll end up with a rate of around 16% or more. Another possibility is that you make the minimum monthly payments for the whole 12 months and you try to move to another 0% interest card. However, the requirements will be tougher and you won't qualify. Thus, you keep your card and you pay off your debt. After your debts are paid off, you keep your card and the bank continues to earn from you.