Last round with brand new charge card rules restrict overdue charges

The final package of new credit card rules went into effect Sunday

. The latest rules limit late payment fees and other penalties. The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 began the reform project, which is now complete. A limit for $25 has been placed on overdue fees under the brand new credit reform rules.Brand new guidelines have been gradually introduced that are cutting into lucrative penalty costs. In response, charge card corporations have dramatically hiked interest rates. Another rule calls for them to justify those increases to federal regulators.Article source - Last round of new credit card rules limit late payment fees by Personal Money Store.

Obtaining past due penalties and also interest rates in check

The newest credit card rules enacted Aug. 22 prohibit credit card companies from charging more than $25 for overdue payments, end the practice for charging customers for not using their cards, as well as order them to reconsider rate of interest increases imposed starting from Jan, 1, 2009. A CNN article on the brand new charge card rules said that if the market conditions that warranted the rate of interest increases no long exist, those rates of interest must be adjusted accordingly. Charge card corporations will be held to account by government regulators assigned to evaluate their justifications. But when it comes to the $25 past due fee limit, the rules give banks a loophole to exploit: if they determine a cardholder's past due repayments are habitual, they can exceed the $25 limit by saying the increase is necessary to offset the economic impact with the overdue. Another new rule prohibits penalty fees from exceeding the minimum payment or the amount charged over the credit limit.

Credit card companies won't give up penalty profits easily

Charge card companies look at the new credit card rules as a threat to their bottom line. The latest round of provisions is projected to keep them from being able to penalize their customers to the tune with $3 billion. A Wall Street Journal report on the charge card industry's response to the restrictions said that companies have been busy upping the ante for balance transfers, money advances, overseas charges and annual fees. As a strategy to get around limits on late payment fees and penalties, cardholders can expect their minimum payments to rise. Banks addicted to large money for nothing via penalty charges will scramble to keep the cash flowing . An executive quoted within the Journal piece said that charge card businesses will miss the easy pickings. They took away about $11.4 billion with their customers' cash last year by hitting them with past due fees. That jackpot is projected to shrink by 29 percent down to $8.1 billion.

Charge card corporations know their customers

The consumer protections allowed by the new charge card guidelines are a challenge to charge card companies. They have responded by rising interest rates to historically high levels. Another CNN report said that within the second quarter, card companies raised interest rates on existing card holders to an average of 14.7 percent -- up from 13.1 percent a year ago . Synovate, the research division of Aegis Group, said the current difference between the prime rate and also the average cardholder interest rate is 11.45 points-more than it has been in 22 years. Consumers played along, spending with credit cards at the second-highest rate ever within the second quarter, according to Synovate .

Further reading

CNN

money.cnn.com

Wall Street Journal

wsj.com

Last round with brand new charge card rules restrict overdue charges

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