A new round of credit card rules take effect today, including a $25 penalty fee cap, a ban on “inactivity fees” and a “one-fee limit” that prevents card issuers from piling on fees for a single event or transaction that violates a card agreement.
The new rules comprise the final stage of the Credit Card Accountability Responsibility and Disclosure Act of 2009, most of which took effect Feb. 22 of this year.
At that time, a ban on retroactive interest rate hikes became law, along with disclosure requirements that now show up on credit card statements showing how long it would take to pay of a balance on minimum payments alone.
This time around, penalty fees are the focus.
Here is a rundown on the Aug. 22 credit card rules, according to the Federal Reserve:
Reasonable Penalty Fees:
Penalty fees have been as high as $39, but the Fed has implemented a $25 limit. In addition, you cannot be charged a late payment fee that is greater than your minimum payment. For example, if your minimum payment is $20, your late payment fee can’t be more than $20. If you exceed your credit limit by $5, you can’t be charged an over-the-limit fee of more than $5.
Exceptions to the Penalty Fee Limit:
A credit card issuer can raise the penalty fee above $25 if:
- One of your last six payments was late, in which case your fee may be up to $35; or
- “Your credit card company can show that the costs it incurs as a result of late payments justify a higher fee.”
Your credit card issuer cannot charge you inactivity fees, or a penalty of not using your credit card.
You cannot be charged more than one fee for “a single event or transaction that violates your cardholder agreement.” For example, you cannot be charged more than one fee for a single late payment.
Re-Evaluation of Rate Increases:
If your card issuer increases your APR (annual percentage rate), it must re-evaluate that rate increase every six months. “If appropriate, it must reduce your rate within 45 days after completing the evaluation.”