Before the law took effect, issuers could impose $39 late fees for past due payments regardless of the minimum payment amount. The Credit CARD Act changed this practice by requiring that penalty fees be "reasonable and proportional to the violation of the account terms." The Federal Reserve set safe harbor caps of $25 for the first violation and $35 for a repeat offense within six billing cycles. To go higher than those amounts, the issuer would have to prove that the costs it incurs as a result of the violation justifies a higher fee.

In addition, the penalty fee cannot exceed the dollar amount associated with the violation. For example, if the minimum required payment of $20 isn't paid on time, the issuer cannot charge a late fee of more than $20. Issuers can only charge a consumer one penalty fee for a single violation in a billing cycle.