New Credit Card Rules

Effective yesterday, the CARD (Credit Card Accountability, Responsibility, and Disclosure) ACT’s next phase went into effect. From the Federal Reserve, here is a summary of the changes you should know about:

Reasonable penalty fees
Let’s say you are late making your minimum payment.

• Today: Your late payment fee may be as high as $39, and you likely pay the same fee whether you are late with a $20 minimum payment or a $100 minimum payment.
• Under the new rules: Your credit card company cannot charge you a fee of more than $25 unless:
  • 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.

In addition, your credit card company cannot charge a late payment fee that is greater than your minimum payment. So, if your minimum payment is $20, your late payment fee can’t be more than $20. Similarly, if you exceed your credit limit by $5, you can’t be charged an over-the-limit fee of more than $5.
Additional fee protections

• No inactivity fees. Your credit card company can’t charge you inactivity fees, such as fees for not using your card.

• One-fee limit. Your credit card company can’t charge you 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.

Explanation of rate increase

• If your credit card company increases your card’s Annual Percentage Rate (APR), it must tell you why.

Re-evaluation of recent rate increases

• Today: Your credit card company can increase your card’s APR with no obligation to
  re-evaluate your rate increase.

• Under the new rules: If your credit card company increases your APR, it must  re-evaluate that rate increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.

Note: A number of other rules went into effect on Feb 22, and you can read about it at the Fed’s site, New Credit Card Rules Effective Feb 22.