Could your bank be charging you an “honouring fee” when you go over your credit limit, just to save you embarrassment at the till?

Have you ever been in a situation where you are out shopping and happily using your credit card, thinking all is well, even though you know you’re probably quite close to your limit. Your card didn’t get declined, so you assume you stayed under your limit. Then you get your bank statement and discover that during your shopping spree your card actually did go slightly over its limit and the bank has hit you with a R145 “honouring fee”!

This is what happened to Standard Bank customer Nicolas who wrote, “I have a fairly small credit card limit, which I often reach and then replenish from my current account. Typically, when I hit this limit, my credit card simply declines payment. I then replenish and try again. However, sometimes Standard Bank allows the transaction to succeed and then charges me R145 for it to succeed. Why is the limit allowed to be exceeded and how can they charge me for overriding my agreed limit?”

According to Standard Bank, the bank’s policy is to allow the transaction to go through to avoid potential embarrassment and that the fee is only charged to customers who opened their accounts before 1 June 2007.

According to the National Credit Regulator, an honouring fee would not be permissible under the National Credit Act. As the National Credit Act only came into effect in 2007, this could explain Standard Bank’s policy on only applying the fee to credit cards issued prior to this date.

“At Standard Bank, we aim to enable a frictionless transactional experience and strive to provide the best customer experience possible. We recognise that our customers might encounter situations where they need the ability to transact but do not have the necessary funds available in their accounts. In these situations, we allow our valued customers to exceed their available funds by a small margin, where there is potential reputational risk they could be exposed to, if we did not honour their payment,” Standard Bank said in response to our query.

For transactional products such as current account, an honouring fee is charged but the bank says it has adjusted its fee structure in 2023 by introducing a cap of R100. “`We have also adjusted this fee downwards for lower-value transactions so that the value of the fee will not exceed the transaction value, which is in line with industry practice.”

Do all banks charge this honouring fee?

Standard Bank appears to be the only bank that charges for exceeding the limit on a credit card, although FNB and Absa charge a fee for honouring a transaction on a current account.

Capitec

Capitec allows credit card users to go over their credit limit by a small amount, but it does not charge an additional fee for this service.

“This is to improve client experience when the card is used at point of sale. In this case, the client must have a good credit profile and be in good standing on their other credit products. The amount used will then be collected with the client’s instalment on the next debit date. Capitec does not charge an honouring fee for this service”.

Capitec also confirmed that this only applies to credit card transactions and it would not honour any transactions such as debit orders that exceed the balance on a current account.

Nedbank

Nedbank does not allow transactions to exceed the limit and confirmed that in compliance with NCA requirements, its policy is to “protect its clients at all times, and no longer permits transactions in the event of insufficient funds in accounts of individual customers.  As such, an honouring fee does not apply.”

FNB

FNB will not allow a customer to exceed the limit on their credit card, but would honour certain transactions on the customer’s current account if they are in good standing. There is a time limit to replenish the funds before paying an honouring fee.

Sajeel Jagjivan, Head of Pricing at FNB Personal Core Banking says that FNB “offers a value-added service that assists customers in real time when they have a liquidity shortfall. This is linked to debit orders, card purchases, and scheduled payments”.

This would ensure an insurance debit order is paid, for example, or allow a point-of-sale transaction when purchasing groceries for the family. The customer is then allowed one day to rectify their account by depositing additional funds before a fee is levied.

The fee structure is tiered: for values less than R45, the fee is equal to the transaction value; transactions above R45 are charged at R45 per R100 with a maximum fee of R200.

Absa

Absa does not charge fees to customers who exceed their credit limits on credit cards or savings accounts, but a fee may apply on honouring a debit order on certain current accounts.

Jean van Rooyen, Head: Retail Pricing at Absa Everyday Banking says fees only apply in exceptional circumstances where a debit order is honoured in excess of a customer’s available balance.

“A fee of R50 per transaction applies per item that is honoured since this requires a manual intervention from one of our credit officials. This fee is only charged a month in arrears, to offer a customer the opportunity to dispute the transaction that was honoured and indeed the honouring fee.”

This article first appeared in City Press.