This Sunday, the final batch of provisions from the Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) of 2009 takes effect. The Aug. 22 rules, which you can read about in more detail in the Bankrate feature, "New credit card rules limit penalty fees," restrict credit card penalty fees in most cases to $25 for the first violation, ban inactivity fees and require issuers to re-evaluate previous rate increases every six months.
Yet the rules leave some wiggle room for card issuers. Here are three issues to keep in mind as you use your cards.
- Penalties for nonuse can take other forms. Card issuers are banned from charging a fee for not using your card, but remain free to lower your limit or close your account if the card is rarely swiped. Use cards you want to keep open on a regular basis.
- Fees can go higher than the safe harbor cap. The law does include safe harbor amounts for penalty fees -- $25 for the first violation and $35 if the same offense occurs within the next six billing cycles -- but issuers can charge more than the cap if it can prove to the Federal Reserve that a higher fee is justified.
"They can do a separate analysis to show that a different number is reasonable and proportional based on their actual experiences," Nessa Feddis, vice president and senior counsel for regulatory compliance at the American Bankers Association, told me in a recent interview.
In the future, she says, card issuers could try to demonstrate that their fees should be higher.
The CARD Act does limit penalty fees to the dollar amount associated with the violation. If you are late making the minimum payment of $15, for example, you can't be charged a late fee of more than $15.
Make sure to read disclosures from your card issuer. If fees are increased, the credit card issuer must notify you 45 days in advance.
- Rate reductions aren't guaranteed. While issuers have to review rate increases that were imposed on or after Jan. 1, 2009, every six months, they only have to lower the rate if the factors reviewed indicate that a rate reduction is appropriate. You won't necessarily be notified if your rate isn't lowered.
The law doesn't require a specific amount of reduction in rate, either. So, don't expect your rate to drop back to its previous level six months after the higher rate is imposed.
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