Fees and Rates Tackled by New Credit Card Rules

It is time your credit card becomes a lit more consumer friendly. A whole new range of laws under the Credit Card Accountability Responsibility and Disclosure Act of 2009 have been put into effect by the Federal Reserve authorized by the Act. Credit card industry is going to see massive reforms under these laws starting this Sunday. A few of the rules have already taken effect on February 22nd 2010, which included a 45 days` notice period for interest rate hike, the elimination of double cycle billing and restriction on getting credit card if the customer is under the age of 21.

The final batch of regulations will be going into effect on August 22nd. The new rules in general will protect the customers from interest rates and unreasonable penalty fees. These rules come as a huge sigh of relief especially for those who are under a lot of credit card debt and carry large outstanding debts. One such changes is that if the APR or annual percentage rate is hiked by the credit card company, they must tell you the reason too. Although, the rule will not really prevent the interest rate hike, you will get an idea about the inherent issue which could be a dropping credit score that you can easily address.

Fee is another aspect addressed by the credit cards. With some limited exceptions, the new rule prevents credit card companies from levying a late fee of over 25 dollars. The exception is that the credit card company has to demonstrate that they have incurred losses of more than 25 dollars, to be able to levy a late fee of more than 25 dollars. Credit card issuers can levy a late fee of about 35 dollars for repeated late payers within a period of 6 months.

Another rule that is coming to effect is that credit card companies cannot charge a fee if the customer doesn`t use the card anymore. Some credit card issuers used to hit the customers with a fee called inactivity fee which is levied for those customers who don`t use the card enough. Credit cards cannot charge more than one penalty fee anymore for a transaction or event giving rise to the fee. A good example of the earlier double penalty practice is when customers were charged with an over the limit fee as well as a late penalty fee when a customer was late with the payment and together with the late penalty the credit line was exceeded.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.