sbm12

That is a MUCH better rate than we get over here. Definitely worthwhile at those rates.

OneFlyGuy

How did you overpay the credit card? I just tried online and it didn't let me pay more than my current balance.

jgoodm

Just send in a check, or call and request wiring instructions for a payment to your account.

broadwayblue

I have done this many times without incident. I simply transfer whatever amount is needed beyond my available credit to my credit card electronically a couple of days before I make the purchase. Works like a charm with my Amex.

Toli

I possibly do not understand the issue that well, but doesn't credit limit mean credit, i e something that you borrow from the bank? Using your own funds and not the bank's money has nothing to do it with your credit limit.

I also find it strange that some banks apparently can prevent you from using your own funds put in a card account, or not give the miles such a transaction earns.

irishguy28

It's simple, really. If you pay off your credit card bill entirely - so now you owe the bank nothing - and then pay them even more money, you are effectively raising your limit (Don't think of it as a "credit limit" now - think of it as the amount you can charge to your card in the current billing cycle without running out of funds).

Or to take a specific example - say your card has a limit of $1,000. At the moment, your card has a balance of $0 - but if you lodge $2,000 of your own money into the account - i.e, the bank now owes you $2,000 - you can now charge up to $3,000 to the card (effectively increasing the "limit", or rather, allowing you to put larger transactions through on your card than would be the case without overpaying) without problems.

get it now?

thehawk75

I used to do this back in 1998 when I was just establishing credit. I was using the 'GM Card' (issued by Household at the time).

My credit limit was a piddly $500.

Every month I was pretty much getting painfully close to my limit (I put everything on the card at that time, fuel, food, etc.).

This was in the days before I used online bill pay (not even sure if it was readily available then). So, one day decided to write a check for the balance plus $500.

It processed perfectly. When my bill came at the end of the month it deducted the extra $500 from it, and I only had to pay about $20 or something.

The following month I overpaid by $2500, and ended up with a credit balance of $1800ish.

Here's where it really got interesting. They applied a 'negative finance charge', basically took my credit balance and multiplied it by my APR (around 30%), and then further credited my account.

I was absolutely amazed! Thought that I had found some bug in their system that actually allowed me to treat my credit card as a 30% savings account

However, I tried to do this the following month. That same mistake never happened again. However, they didn't take away the 'free' money they had given me the previous month.

At any rate, I continued to overpay my balance until they finally upped my credit line above $2500 six months later.

That said, I know things have changed, as although I haven't done it, I have been warned by CSR's at Chase NOT to simply go and overpay my bill if I want to be able to spend more on a card purchase. She actually called it a 'de facto credit line increase' (questionable definition, but, nonetheless their perception).

I do know that Citi will allow you to go into a credit balance -- to a large sum, if you do it through CSR and they do an ACH transfer. I was very recently tempted to do this in order to procure a bunch of thank you points while funding a new Citi account, however, after consolidating credit lines, I had more than enough to max out my thank you points for the year).

BigLar

I've used a credit card to make taxpayments several time. The 2.49% fee makes it a poor deal, with a couple of exceptions:

1. I needed a couple thousand points to get to a threshold on a hotel card. I got them and was able to book a very nice hotel, for which I otherwise would have had to pay something.

2. I needed 5000 points to get to a threshold with my *wood amex, so I pre-paid my taxes just before I filed them. Got the money back in time to make the cc payment, and the 5K got me to the 20K->25K mile transfer point.

3. I got two Citi cards last year, which required a $750 spend to trigger the bonus. Made two payments to the IRS ($750 on each) and got 50,000 miles. Not a bad return for the $37.75 it cost me in fees.

nsx

I did this back in the days of US savings bond purchases with credit cards. IIRC, the computers will still only let you buy up to your credit limit per day, and if that's the case it would take you 15 days even if you prepaid the card.

wanderenvy

Some real experiences from many years ago:

(a) My Citibank visa had a credit of 10 cents. I wasn't using the card and the credit stayed on file for a couple of months. Citibank was very nice and mailed me a letter and check for 10 cents. The letter clarified that their policy was not to keep a credit on file. The postage was 28 cents and it probably cost them a few bucks to send out the payment. That was the day I decided never to ever open an account with Citibank.


(b) It was the due date to pay my credit card bill and not being one to carry a balance, I called up the credit card bank to find out my options. This was before online payments and they gave me two choices. Make a last minute payment by phone for a meaningless $20 fee or do a western union transfer, which would cost less than $10. The grocery store on the corner had a western union office so I decided to give it a try. At the store, the girl in customer service was very nice and processed my wire transfer efficiently; happily accepting my credit card as payment towards the wire transfer. The same credit card whose full payment I was making. So I made a $1500 payment to my credit card bank, charged it back to the same credit card as a new purchase and in essence delayed a $1500 payment for another 28 odd days by paying a $8 fee to western union.

This was too tempting so when the next due date rolled by, I was back in line at the grocery store. This was more out of curiosity to see if it worked again or it was a fluke. By this time, the charges on the card had accumulated to around $2500 ($1500 previous + 1000 new). The wire transfer fee this time was about $11. I charged the western union payment back to the same card and I had a hard time walking out of the store with a straight face.

Yet another month went by and the due date rolled in. I wasn't sure if I should try the same approach again, but there was nothing to lose and I wasn't doing anything illegal, so I landed up back at the grocery store. Sadly, they had wised up and the customer service dude informed me that I had to pay cash to make a wire transfer.

And oh, I was enrolled in a miles program with the card, so I ended up getting 1500 + 2500 + 2500 miles for what was really a net $2500 spend.

kevinsac

If I have an unusally large purchase coming up, I simply will call AMEX and give them a heads up. I've done that several times when buying a car.

Before I was using an SPG AMEX, I had a United VISA, which had a $35,000 limit. Many years ago, when I wanted to buy a care using the VISA, I asked then about making a $20K or $25K payment ahead of time. Back then, they told me that it would not work, because even though I would have had a $20K+ credit on the account, when the computers tried to process a $50K charge, the VISA system would have shown a balance due of $20K+. The automated approval process back then could not distinguish between a positive balance (amount due) or a negative balance (a credit).

Thus, I started only using my AMEX for large purchases.

lincolnrozelle

Overpaying works fine with Amex.

However you can't pay your UK Tax Bill (HMRC) with Amex.
Amex isn't as widely accepted here. I recently bought a car and they were going to charge a few percent to use Amex (which would have cost me hundreds). OK if you can afford to "buy" miles this way. But I didn't want to part with 300 quid.

Toli

Thanks. That part I have no problem understanding (although I'd still challenge the use of "credit limit" in relation to one's own funds deposited in a card account).

I wonder, however, why banks would have a problem with the customer's using their own money rather than borrowing from the bank - or more exactly, why are the banks allowed to get away with such restrictions bordering on the illegal.

Tuneman1984

I've had numerous Canadian credit cards where this works too. When my limits were lower, I often had to do it in order to fit a pre-auth for car rental or to book a flight. I know with one card I had I learned it's a one-way street. I had a small credit on the card and decided to transfer it into my bank account. I got dinged the cash advance fee and interest.....somehow.

Xelint

Last year Citi Rewards was offering 5% rebate on purchases so I was over paying but they would only take 3 overpayments a month. Was a nice way to make some money and even made money on paying my taxes.