For example, travelling from King's Cross St. Pancras on the Underground to Victoria and then five trips on TfL's bus network sees the amount deducted not exceed the cost of a Zone 1-2 Travelcard (£5.60 off peak or £7.20 through peak periods). Initially, the cost per journey is immediately deducted, which sees £1.60 taken for the first Tube ride between King's Cross St. Pancras and Victoria (£4.00 for those paying cash) and £1.00 per bus ride thereafter (£2.00 for those paying cash). However, as soon as deductions totalling the cheapest possible ticket for the types of travel undertaken thus far is reached, the Oyster card caps itself and all subsequent journeys are free.
In this case, following the fourth bus ride (£5.60 is now reached), any other journey on a bus in the Greater London area that day will be free. Any other Tube ride in Zones 1 & 2 will also be free.
It's so easy to purchase a Zone 1-4 Travelcard (£6.30 off peak or £10.00 through peak periods) "just to be on the safe side" and never leave Zone 2! Rather than potentially waste £2.80, request an Oyster card and top it up either online or at any Tube station and travel safe in the knowledge that you never, ever pay more than the absolute minimum for your individual travels.
How does the Oyster card know to charge you the cheapest fare possible though? TfL has released details showing that their, now out-dated, technology can deduce within one-fifth of a second the correct fare (or to cap and deduct nothing) from 1,830,000 different permutations.
What Oyster card readers cannot do, however, is to recognise any of the non-London free concessionary bus passes, which are ITSO compliant, unlike Oyster, which will at some time in the future, need to be upgraded to meet ITSO standard. (GL)
How much you can save using Oyster in London compared to cash.
Further reading on ITSO compatibility.