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Final credit card law provisions go live

By Jason Alderman

If you've ever paid a penalty for sending in your credit card payment late, the following news might spark your interest: On August 22, 2010, the Federal Reserve Board implemented the third and final stage of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, which fundamentally changes how credit card agreements now operate.

Probably the most significant of these latest changes is that the Fed has placed caps on amounts that can be charged for late credit card bill payments:

  • Generally, the first late payment fee cannot exceed $25.
  • However, if someone makes more than one late payment in a six-month period, the fee can rise to $35 for every subsequent offense.
  • Late fees can no longer exceed the minimum amount owed. So, for example if your minimum payment due is $15 and you miss the deadline, your late fee for the month cannot exceed $15.

Other changes include:

Consumers cannot be charged multiple penalty fees for any single transaction. So, for example, if your payment check bounces, you cannot be charged both a returned check fee and a late fee.

Cardholders can no longer be charged an "inactivity fee" for not using the account for new purchases.

If your credit card issuer increases your card's annual percentage rate (APR), it must spell out why. Plus, if your APR has been increased since January 1, 2009, the issuer must review that decision after six months and, if appropriate, reduce the rate within 45 days – or provide written notice why the increase should still apply.

Other CARD Act changes that already went into effect earlier in the year include:

  • The APR on new credit card accounts cannot be increased during the first year unless: A clearly disclosed introductory period (teaser rate) ends; it's a variable-rate card tied to an index that has increased; you enter a debt repayment workout plan and don't comply with its terms; or you're over 60 days late making at least the minimum monthly payment.
  • Card issuers must provide 45 days' advance notice before raising the APR on new transactions or making other significant account changes. Also, you're allowed to cancel the card before these changes take effect and pay off the balance at the old rate.
  • Credit card statements must be mailed at least 21 days before the balance is due. Also, payments must be credited as on-time if received by 5 p.m. on the due date.
  • When one card carries balances at different interest rates – such as one rate for purchases and another for balance transfers – payments must be applied to the highest-rate balance first.
  • Over-the-limit fees cannot be charged unless you have previously agreed (opted in) to allow charges over your credit limit.
  • Card issuers may no longer factor in average daily balances from a previous billing cycle that wasn't fully paid off when calculating current interest charges (known as "double-cycle billing").

For further details about CARD Act provisions, visit They also have a great guide that explains how credit cards work ( A final suggestion: Always read all mailings from your card issuers to ensure you're up-to-date on any account changes.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

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