Do you remember the changes in the credit card rules?
Credit card rules provide benefits for the consumers.
As a consumer, it pays to be smart when choosing and using a credit card. A few new rules enacted by the Federal Reserve mean more credit card protections for card holders. It is important to read all correspondence sent to you by your credit card company. Contact your credit card company and ask them to explain anything in the notices that you do not understand. Here are some key changes that your credit card companies should have shared with you.
Reasonable penalty fees – A fee cannot be 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 justifies a higher fee.
Also, a late payment fee cannot be greater than your minimum payment. So, if your minimum payment is $30, your late payment fee can’t be more than $30.
Inactivity fees - Although the Federal Reserve Board banned inactivity fees for credit cards in August 2010, many credit card companies have figured out other ways to get between you and your money with such things as higher annual fees or forfeited rewards. Be sure to read the fine print related to your credit card policies.
One-fee limit – You can only be charged one fee for a single transaction that violates your cardholder agreement.
Explanation of rate increase - If your card’s Annual Percentage Rate (APR) does increase, the credit card company must explain why. Recently, the Consumer Financial Protection Bureau (CFPB) stated: “Card issuers generally are prohibited from increasing the interest rate on an existing balance unless the cardholder has missed two consecutive payments.” In addition, the CFPB says issuers generally are permitted to increase the interest rate prospectively on new purchases, but must give the consumer 45 days advance notice – during which time the consumer may cancel the account.
Re-evaluation of recent rate increases – Before the Credit Card Act, a company could increase your card’s APR and have no obligation to re-evaluate the rate increase. Now if your credit card company increases your APR, it must re-evaluate that rate increase every six months. If you qualify, generally meaning that you have good credit, it must reduce your rate within 45 days after completing the evaluation.
No two-cycle (double-cycle) billing – You can only be charged interest on balances in the current billing cycle.
Keep in mind that you must be given the option to close your card before certain fee increases take effect. For information on navigating the credit card process, visit the Federal Reserve System’s Consumer Credit Card Guide.
Disclaimer: The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers and conditions do change frequently. Please be sure to always verify all terms and conditions of any credit card prior to applying.