St. Louis, Mo., August 19, 2010 – New rules on credit card interest rate increases and penalty fees are mostly good news for consumers, according to the Better Business Bureau (BBB).
The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 mandated major changes for the credit card industry. Some changes occurred on Feb. 22. Another round takes effect Aug. 22.
The new rules limit penalties for paying your bill late and eliminate fees for not using your card. They also prohibit credit card companies from charging you more than one fee for a single event or transaction that violates your cardholder agreement.
“Consumers who pay their bills on time don’t usually worry about late fees,” said Michelle L. Corey, BBB President and CEO. “But if they miss a payment or go over their credit limit, they should no longer incur unreasonable fees.”
According to the Federal Reserve Board, the new credit card rules require:
- Reasonable late-payment penalty fees. In the past you paid the same 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 increase the fee to $35. The company 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, $10 is all the company can charge you as a late fee.
- No inactivity fees. Credit card companies no longer can charge 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 so within 45 days after completing the evaluation.
The rules that took effect in February required credit card com
panies to give you 45 days notice for interest rate changes and gave you the ability to opt out of changes and pay off your balance over five years. The rules also put restrictions on credit cards for persons under 21 years old and required companies to eliminate double billing cycles.
More information about the new credit card rules is available at the Federal Reserve Board’s website at http://www.federalreserve.gov/creditcard/.
The BBB has 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.
For more advice on managing your credit, visit www.bbb.org or call 314-645-3300.
Contacts: Michelle Corey, President & CEO, 314-645-3300, mcorey@stlouisbbb.org, or Chris Thetford, Director of Communications, 314-645-3300, communications@stlouisbbb.org
