Federal Reserve
rules limit the penalty fees that credit cards charge. The rules, which stem
from the Credit CARD Act signed into law in May 2009, were effective August 22,
2010, and are in addition to other rules, such as restrictions on interest rate
hikes, that went into effect earlier.
Here are five
things you should know about credit card penalty fees:
1. Credit Card Late
Fee Cap
Late fees are
capped at $25, except in a couple of instances. The fee can go as high as $35
if you were late with another payment in the previous six months or your credit
card company can prove it incurred costs that justify charging a higher fee.
In addition, credit
card companies can't charge late fees that exceed minimum payments. So if your
minimum payment for the month is only $15, your credit card company can't
charge you any more than $15 for paying late.
2. Credit Card
Over-Limit Fee Cap
Your credit card
issuer can't charge a fee for exceeding your credit limit unless you opt into a
program that allows for such credit limit flexibility. If you do opt in, the
fee can't exceed the amount you charge over your limit. So if you go over your
credit limit by $5, the over-limit fee can't be any more than 5 bucks.
3. No More Credit Card
Inactivity Fees
Credit card
companies can't charge fees for not using your credit card, a practice many
companies adopted in the last couple of years.
4. One Fee at a
Time
A single mistake,
such as a late payment, can trigger only one fee. Your credit card company
can't charge multiple fees for a single event or transaction.
5. Credit Card
Rates: Issuers Must Explain Increases
Before it can raise
your rate, your credit card company must explain why it's proposing a rate
hike. And it must re-evaluate the rate every six months and decrease it within
45 days of the evaluation when appropriate.
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