Credit Card Fees Soon to Be "Reasonable and Proportional" to the Violation

The Federal Reserve may be your new hero, especially if you've been hit with late fees or raised interest rates on your credit cards over the past year. Effective August 22, 2010, the Federal Reserve System notes that credit card companies need to meet new standards that they note as "reasonable and proportional" to the offense. Will today's consumers benefit from the Federal Reserve's intervention in credit card fees?

What are the most notable changes to the Federal Reserve's policy on credit card fees?

Most notably, credit card users will notice a reduction to the often exorbitant late fees charged by credit card companies. The new guidelines cap credit card late fees at $25 for a first offense within a six month period. For the second offense within a six month period, that amount can only be raised to $35. This is in contrast to the late fees currently imposed by credit card companies, which may be upwards of $39, according to The New York Times. The Federal Reserve also notes that the late fee cannot exceed your minimum payment. The hope is that consumers will be able to take that money "saved" and apply it towards their outstanding balance and reduce their credit card debt.

In addition, credit card companies will need to offer consumers more information about interest rate hikes. They need to tell you why your rate is being raised, and then they're obligated to re-assess the hike every six months, according to the new guidelines. With luck, consumers will be able to pay off their debt without continually climbing interest rates to hold them back.

Smaller changes also worth mentioning are the discontinuation of inactivity fees and a one-fee (only one charge per occurrence) limit.

Who'll benefit from these changes?

American consumers should be excited by these changes to credit card policies. The guidelines don't absolve consumers from their responsibilities, but it does prevent the credit card company from taking advantage of someone who is already unable to pay of their bills. Credit card companies may take a substantial hit at the reduction of these late fees and a closer watch on their interest rate changes.

Do credit card companies have any recourse against these changes?

It's unlikely that credit card companies can do much to alter these new guidelines, which went into effect on August 22, 2010. However, they may take a closer look at your credit history before issuing you a card to begin with. If they do choose to issue you a credit card, expect a lower limit until you've proven yourself to be a reliable (or, at least not completely unreliable) consumer.

Kelly Herdrich

---

Read more about Credit Cards

Read more about Personal Loans

Read more about Credit Repair

Bad credit credit cards

See more credit cards