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Beware of unexpected bank overdrawn fees on your credit card

gices
(Level 5)
19 Oct 2017 08:21, updated
03 Mar 2013, published

For many people, a credit card allows them to purchase things for which they don’t have the money yet. It could be items which are absolutely necessary for them or just stuff they’d like to keep them happy. I use mine differently though and the only reason I got the credit card in the first place is because I needed one to be able to make purchases on the internet.

While most people will usually settle their bill at the end of the month when they get paid, either in full or by repaying a small amount towards what they owe, I use my credit card as a cash card and load money onto it before I buy anything. When I registered to get the credit card with MCB, they offered me the Primo Card which has a credit limit of only Rs5,000 because I didn’t have proof of income with any local bank at that time.

Now the whole point of having a limit is to restrict you from going overboard, that is, spending more money than you would actually be able to afford and repay. This is an important regulation in banking as they exist to help customers and not put them in financial difficulty. Anyway, in December last year, I bought quite a few things from abroad and when I checked my statement, I found a weird entry entered as "Overdrawn fees" for an amount of Rs150. I was baffled because when I make a purchase, I preload money onto my credit card prior to the transaction, so I wondered what those charges were.

I called MCB and an agent told me the Rs150 were the fees for going over my limit. So I told her a limit, by definition, is something that you cannot go beyond, so it didn’t make sense what she was telling me. She said banks usually allow you to go over your limit by a small amount and when I asked her to confirm by how much exactly, she couldn’t reply me. It was maybe Rs200-300 or 2% according to her. I find this really unfair because to me, the bank should reject the transaction instead of letting me go over my credit limit and then charging me a whopping Rs150 for Rs200 overdrawn.

I think banks need to be more transparent about their charges and when you’re signing up for an account with them, the representative should tell you about all those things instead of waiting for you to ask questions about specific things. I’ve been told the overdrawn fees clause is written in the contract I signed and that maybe true but I didn’t check the tiny print. My bad and I had to pay twice the charges because I happened to go overdrawn 2 times within a space of a couple of days. MCB allowed both transactions since I put on more money for the second purchase which brought my balance back to zero and then again over the limit.

This is really frustrating because I don’t use their credit facility but use my own money to buy things but still they found a way to charge me. You cannot even get a real time statement of your balance online through internet banking as it takes a couple of days for a transaction to appear in your statement. You will need to call the bank to find what your current balance is and to me that defeats the purpose and they should probably advise their customers that for credit cards, telephone banking is more appropriate. This would then give you a better insight and allow you to make a more informed decision about whether to use your credit card or not.

Did you have similar experiences? I’d like to hear your comments.

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Comments (5)
Ravi_Chinasamy
Ravi_Chinasamy  (Level 1)
03 Mar 2013 20:28
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Well man! i did find the same clauses in my contract at SBM! i believe it is something better since you do not always have time to go to the bank and repay the whole balance every single times! and therefore having the ability to go overboard as you tell us may be a facility for those who usually need more than the limit to purchase things! Man if you can go to the bank every time to clear your balance better go for SBM smile and not a credit card! there you got no overboarding whats so ever! you pay as long as you got the money on the card!

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gices
gices  (Level 5)
03 Mar 2013 22:57

Thanks for your input.

Of course it's a great advantage for those who want to purchase something which is a little bit over their credit limit but for me, because I use it as a cash card and incurred a penalty since the bank allowed the transaction to take place, it ruins the definition of limit. I must admit I applied for the card hastily and didn't read the terms well and the charges happened because of incorrect calculation of exchange rates when I shopped online.

Btw I use internet banking to transfer money from my savings account to my credit card; so no popping to the bank at all.

SBM Smile was an option but I discarded it because it has a short lifespan (6 months or so) and therefore needs to be renewed. Furthermore they charge you $7 (US) before you can use the card for the first time according to this comment.

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le_mauricien_
le_mauricien_  (Level 1)
04 Mar 2013 14:30
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Man I have the exact same card for more than a year and I use it in the same way as you do. Even though I make lots of purchases online i've never got "Overdrawn Fees" in my card statement till now. You should know that there's gonna be an overlimit charge on you if you go beyond the credit limit. This applies to almost all credit cards and the banks providing them will impose that on you as well. Hence you should check carefully if your card has enough funds before making any purchase. When making online purchases you should check the rates and make sure you have the sufficient amount in your card. I think that you are also wrong when you say that you do not use their credit facility but use your own money. In fact when you signed the contract with the bank you mainly agreed to use their credit facility! This means that the first Rs 5000 you use on your card is the bank's money. The Rs 5000 that they took from your account to put on hold is just a sort of guarantee. You still earn interest on the Rs 5000 on hold when there's say Rs 5 on your credit card. When you return the card you'll get the Rs 5000 back.

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Replies (3)
gices
gices  (Level 5)
04 Mar 2013 14:49

Thanks for commenting.

As I said above, I went overdrawn because of incorrect calculation of the exchange rate. The rates were determined by MCB at the time they processed the transaction and not what I thought it would be. I still maintain I do not use their credit facility because I preload money onto my card and when that's reflected in my balance, I take it as the go ahead for my purchase. So if I was buying something that's Rs2000, I would put that money on there first which would bring my balance to Rs7000 and the Rs5000 bank money will be unused.

As far as I know, you do not earn any interest on credit cards even when you have surplus money. I'd be interested to know where you got that information.

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le_mauricien_
le_mauricien_  (Level 1)
04 Mar 2013 16:00

I do not understand why you have to preload money onto your card when you already have the Rs5000 bank money on it. If I had to make the same purchase, I would have used the Rs5000 bank money first then make payment for the Rs2000 before the 45 interest free days are over. This is a credit card, you should make use of the bank money.

I once made a purchase of Rs28000, I preloaded Rs25000 on the card then used Rs3000 from the bank money. At the end of the month I made payment for the Rs3000 bank money. I didn't have to pay for any overdrawn fees.

In my previous comment I wasn't talking about interest on credit cards when you have surplus money. Yes of course you do not earn any interest on it. I was talking about interest on the Rs5000 which the bank took on hold as security as per the terms of my contract with the bank to get a credit card. I thought it was the same for you. Now that I understand why you went overdrawn, this is irrelevant.

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gices
gices  (Level 5)
04 Mar 2013 16:15

Let's just say I've gotten into the habit of not using money which I don't have yet. Why get a credit card then you might ask? You cannot buy online here without a credit card (in the UK, visa debit cards are fine to use on the internet, here in Mauritius, it's a different story). SBM Smile excluded.

My Primo card got approved by transferring a huge sum from another account onto my MCB account. So there was no need for the bank to hold a deposit money or ask for another guarantee.

It's good to read about the different ways to open a credit card...

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Yashvin
Yashvin  (Level 1)
05 Mar 2013 15:06
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I never got this "limit" problem with SBM credit cards. Very recently, I was paying for a purchase and the transaction was rejected. I tried a few times because as per my calculation of exchange rates, the total was very near my limit but did not exceed it.
I called the hotline and got the problem checked. The lady on the phone explained to me that my purchase was slightly over the limit (perhaps by Rs100 or Rs200) and that's the reason why my purchase was not going through.

Fortunately, I had the option to choose a cheaper shipping alternative and my transaction went through, smoothly this time...

Change your bank, MCB are money s*ckers ;-)
The name itself tells you, a Mauritius COMMERCIAL Bank

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gices
gices  (Level 5)
05 Mar 2013 19:54

Glad to have you here Yashvin :)

You see, I would prefer the transaction to be rejected by my bank if I'm going over my agreed limit. This gives me more control over my spending. For me, MCB allowed the transaction and it was Rs300 more than the actual limit. I might have to switch over to SBM because it looks more convenient to me.

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bird_dodo
bird_dodo  (Level 1)
20 Jun 2013 01:52
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wow i have a credit card too but im not a big spender..but that thing is fishy. It ruins the whole purpose of having a limit to the credit card!

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aki123456789
aki123456789  (Level 1)
03 Feb 2014 20:42
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yes that true

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