Question

A consumer has a credit limit of $10,000 on her credit card with available credit of $1,000. She buys something for $900 online and before that charge appears on her credit card, attempts to buy something else for $500. What would occur in this situation?

Answer 1

When the consumer exceeds her credit limit due to pending transactions, the last transaction may be declined or an overdraft fee may be incurred if the transaction is initially authorized.

Step-by-step explanation:

If a consumer has a credit limit of $10,000 on her credit card with available credit of $1,000, and she makes a purchase of $900 online, this amount will be deducted from her available credit, leaving her with $100 in available credit. Before this charge is reflected and reduces the available credit, she attempts to make another purchase for $500. In this situation, if the first charge has not yet been posted to the account, her credit card could initially authorize the second purchase. However, once both transactions are posted to the account, the consumer will exceed her credit limit by $400. Most likely, the credit card issuer will either decline the second transaction or allow it and charge an overdraft fee for exceeding the credit limit.

It is important for consumers to keep track of their spending and pending transactions to ensure they do not exceed their credit limits, as this can lead to fees and negative impact on their credit score.