http://www.federalreserve.gov/consumerinfo/wyntk_creditcardrules2.htm

More new rules from the Federal Reserve mean more new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on August 22, 2010:

Reasonable penalty fees

Let’s say you are late making your minimum payment.

• Previously: Your late payment fee may be as high as $39, and you likely pay the same fee whether you are late with a $20 minimum payment or a $100 minimum payment.
• Under the new rules: Your credit card company cannot charge you a fee of 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 justify a higher fee.

In addition, your credit card company cannot charge a late payment fee that is greater than your minimum payment. So, if your minimum payment is $20, your late payment fee can’t be more than $20. Similarly, if you exceed your credit limit by $5, you can’t be charged an over-the-limit fee of more than $5.

Additional fee protections

• No inactivity fees. Your credit card company can’t charge you inactivity fees, such as fees for not using your card.
• One-fee limit. Your credit card company can’t charge you more than one fee for a single event or transaction that violates your cardholder agreement. For example, you cannot be charged more than one fee for a single late payment.

Explanation of rate increase

• If your credit card company increases your card’s Annual Percentage Rate (APR), it must tell you why.

Re-evaluation of recent rate increases

• Previously: Your credit card company can increase your card’s APR with no obligation to
  re-evaluate your rate increase.
• Under the new rules: If your credit card company increases your APR, it must re-evaluate that rate increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.

This set of rules is the latest in a series of regulations that implement the Credit Card Accountability, Responsibility, and Disclosure Act (the Credit Card Act). For information on protections under the Federal Reserve’s other credit card rules, read What You Need to Know: New Credit Card Rules Effective Feb. 22.

• Late fees – creditors must provide at least 21 days from the date the bill is mailed, for you to pay your bill. In addition, bills cannot be due on weekends or have adjusting due dates (the 17^th one month and the 18^th the next). 
• Over- limit fees – before you can make a purchase that exceeds your credit limit, you will have to “opt-in” and authorize receiving an over-limit fee. If you do not, the purchase will not go through. 
• Interest rates and interest calculations –
  • A creditor cannot increase your interest rates on your current balance due to clauses in agreements such as, “any time, any reason” or “universal default.” The ban also severely restricts retroactive rate increases due to late payment.
  • Interest on promotional rate credit cards must last for a minimum of six months.
  • Payments made that exceed the minimum payment due must be applied to the highest interest rate portion of accounts. So, if you have an account with an interest rate of 23.99% for cash advances and 14.99% for purchases, the excess amount must go to the cash advance balance.
  • The practice of calculating interest for the current month on the previous month’s balance is now prohibited. 
• Plain language and Clear Information –
  • Contract terms must be in written in clear language and disclosed in such a way that consumers can understand them and effectively manage their finances.
  • Information regarding how long it will take and how much it will cost the consumer to pay off an account, if they only pay the minimum due each month, must be shown on monthly statements.
  • The creditor must also show the payment and interest cost if the consumer were to pay the debt off in 36 months. 
• Other new rules –
  • Fees on subprime or low-limit credit cards are substantially reduced and regulated. Consumers can no longer be charged numerous fees on the credit card, just for opening the account.
  • Store cards and gift cards – the law limits inactivity fees on cards for the first 12 months it is open.  In addition, any fees for the cards must be clearly disclosed.

As always, it is up to us, the consumers, to carefully read the terms of any credit card we have or decide to open. The rules and regulations in the CARD Act are meant to provide consumers a clear and concise foundation to successfully navigate the world of credit and personal finance.