Discover, American Express end fees for exceeding limit

— -- Discover Financial and American Express plan to stop charging fees when consumers spend past their credit card limits.

The move, reported by American Banker Monday, comes six months before a new law clamps down on such fees. The law doesn't require issuers to eliminate over-limit fees, but it will prohibit them from imposing these charges unless consumers say they want the ability to exceed their credit line.

These fees provide a significant boost to the industry's bottom line. In 2009, issuers are expected to reap $3.7 billion from over-limit fees on credit cards, up 16% from 2008, according to R.K. Hammer Investment Bankers. The firm says over-limit fees average $35.

It's unclear whether, and to what extent, other issuers will also eliminate over-limit fees. But Marc Hedlund, CEO of Wesabe, a personal-finance site, says consumers shouldn't rejoice just yet.

"Taking away these fees could mean that others will show up in their place," says Hedlund.

Indeed, amid the difficult economy, most issuers have either raised fees or interest rates for credit card borrowers. Many have done both, citing the difficult economy, high costs and consumers' increased riskiness.

Analysts say over-limit fees don't make up a huge part of American Express' and Discover's revenue, which may explain why they're willing to eliminate them. Other issuers, however, may not be so eager to ax over-limit fees.