Watch Out for New Credit Card Rules

August 17, 2010

More changes to the rules for credit card companies are on the way, effective August 22nd.  These changes will affect penalty fees and rate increases on your credit card account.

The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 mandated a lot of changes to the credit card industry.  Some of those changes went into effect on February 22nd, 2010.  They included: 45 days notice for interest rate changes; ability to opt out of changes and pay off your balance over 5 years; restrictions on getting a credit card under age 21; and no more double billing cycles.  Now another set of changes is going into effect on August 22nd.  According to the Federal Reserve Board, here’s what these new credit card rules include:

  • Reasonable late-payment penalty fees.  In the past you paid the same expensive late fee whether your minimum required payment was small or large.  The new rule says that your credit card company can’t charge you more than $25 for a late payment unless you’ve been late on one of your last six previous payments, in which case it can up the fee to $35.  Also, it can’t charge you a late payment fee that’s more than the minimum payment you owe.  So if your minimum payment is only $10 this month, then $10 is all the company can charge you as a late fee.
  • No inactivity fees.  No more being charged a fee for not using your card enough.
  • One-fee limit.  You can’t be charged more than one penalty fee for the same transaction.
  • Explanation of rate increase.  If your credit card company increases the Annual Percentage Rate (APR) it charges you, it has to tell you why.
  • Re-evaluation of rate increases.  If your credit card company does increase your APR, it has to re-evaluate that rate increase every six months. If it decides to lower your rate based on that evaluation, it has to do it within 45 days after completing the evaluation.

To learn more about the new credit card rules visit the Federal Reserve Board’s website.
A word to the wise: if you always pay your credit card on time you won’t have to worry about penalty fees and your credit score will thank you.