In line with the CARD Act, the Federal Reserve announced the new rules this week. The new protection measures will go into effect August 22. The rules will be the final installment of the CARD Act and will cap late fees and help provide some relief from rate increases on credit cards.
The new rules involve:
Late Payment Fees
Most of the late payment fees on a credit card bill will be capped at $25. The fee can increase up to $35 if one of the last six payments you made was late or if the issuer can provide proof the costs justified a higher fee.
Penalty fees can not exceed the amount of the violations that incurred the fee. In other words, a credit card company can not charge a customer a $49 fee if a customer is late making a minimum $15 payment. They can only charge $15 or less. Also, customers can not be charged a fee more than once for a single transaction.
Interest Rate Increases
There are conditional protections on APR increases. If there is any increase in your annual percentage rate, must be re-evaluated by the card issuer every six months. This includes increases after January 1, 2009. The issuer can decide to reduce the rate with a 45 day period after the evaluation is completed. Reduction in rates is possible if the initial reasons for the increases do not exist any more.
If card holders have cards that are active but not being used, they can not be charged inactivity fees by their credit card companies. Some issuers would assess fees if cards were not being used in a 6-12 month period. Many credit card companies have already starting taking action on this rule by closing down the accounts of card holders that are not being used within a years time period.
As most of the new rules involve fee structure, understand that the credit card companies were making a lot of money from these fees. In the cases where the issuer still gets to make the call about lowering raised rates, chances are good the issuer will collect the higher free. Consumers need to be consistent in checking their monthly statements for errors or questions concerning the new rules. It is also important for cardholders to review the materials that discuss the changes being made to accounts. While the new changes are meant to enhance consumer protection, it doesnt mean they are foolproof or that consumers can get careless.
Review Your Account Regularly
Credit card companies are losing money on the CARD Act changes and will be looking for any loophole in the new regulations to make some of that money back. There will be a lot more chances coming in regard to canceling existing rewards and other programs. New programs will be created and you may not find the same benefit in what they are offering. Review the rewards and benefits your card is offering and compare it with other new credit card offers. The Federal Reserve has even launched a survey that helps customers seek out new credit card offers and compare them to what is currently available on the market. Rewards programs are not listed on this site but consumers can read the agreements from each card company. If you find your company can not meet your needs any longer, make a switch to a card that does have incentives based on your lifestyle and financial situation.