What the New Credit Card Rules Mean to You

The folks over at Money magazine have been running a contest to name the most irritating fees that consumers are subject to from banks, airlines, and credit-card companies.

The magazine’s editors narrowed the field down to 15 most-hated fees and eventually down to two, one of which is the practice of imposing an inactivity fee if you don’t use your credit card often enough. The good news is that the Federal Reserve has issued new rules under the the Credit Card Accountability, Responsibility, and Disclosure Act outlawing this practice and beefing up other consumer protections as well.

In addition to banning inactivity fees, the new Fed rules also address late fees, limiting the amount to $25, unless you’ve also been late with one of your six previous payments, which can bump the fee up to $35. Your credit card company also cannot charge you more than your minimum payment. If your minimum payment is only $20, for example, that’s the maximum fee the credit card company can impose on you. Similarly, if you go over your credit limit by $10, that’s the maximum penalty you face.

If your card issuer increases your interest rate, it must tell you why, under the new rules, and it must re-evaluate the reasons for the increase every six months. (Keep an eye out for those small-print terms and conditions brochures in your mailbox.)

In response to the credit-card reform law, however, many card companies switched to interest rates linked to the prime lending rate, allowing them to raise rates as the prime rate goes up without notifying card holders. Unfortunately, say many consumer advocates, the Fed rules on interest rates don’t apply to these accounts and consumers are still at risk of paying higher rates without advance notice.

Critics also note that there is no cap on interest rates and that card companies are still free to lower credit limits, raise minimum payments, and close accounts without notifying card holders. Bottom line, you'll need to examine your credit card statements more closely to stay on top of the rates you're being charged from now on.

You can find a comprehensive look at how the Credit CARD Act will affect you at CreditCards.com.