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New Rules Restrict Credit Card Fees

Credit cards will no longer be able to impose “inactivity fees” on little used accounts.

Late fees won’t be allowed to exceed $25 – down from the $39 most charge today.New Rules Restrict Credit Card Fees

Nor will credit cards be able to charge more than one penalty fee for every late payment.

Those are the key rules the Federal Reserve announced today as it moves to implement the final portion of the Credit Card Accountability, Responsibility and Disclosure Act Card Congress passed last year.

Most of the new law and regulations it spawned took effect in February. These last rules will become effective Aug. 22.

The Fed also told credit cards that they can’t impose penalties that exceed the dollar amount of the associated violation.

So you’ll never be charged a $25 fee for missing the deadline on a $20 minimum payment.

And the Fed also ordered credit cards to review all of the accounts they’ve hit with higher interest rates since the beginning of 2009 to determine if those increases should be rolled back.

This is intended to fulfill that part of the law that requires cards to reduce interest rates for consumers with improving credit reports.

But don’t hold your breath on having the rate on any of your cards cut.

This is putting yet another band-aid on a system that’s still stacked heavily in favor of credit card issuers.

Even with the provisions of the Act now fully in place, credit card issuers still have plenty of ways to make up lost revenue and crank up abusive new fees.

Banks are raising annual fees on accounts that already have them and imposing them for the first time on accounts that don’t.
International transaction fees, the cost of making purchases in foreign currency, is going up and the fee is being extended to items bought overseas even if the purchase was made in dollars.

Minimum fees for balance-transfers and cash-advances are going up and limits on much you could be charged (these fees are usually a percentage of amount transferred or borrowed) are being eliminated.

Citi has found a way around the Act’s consumer friendly-rules on rate increases and how payments must be credited.

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