Fees make up a large part of a credit card issuer’s revenue, but that source will be shrinking when the Credit Cardholder’s Bill of Rights laws go into effect.
For instance, under the new law you can opt out of the privilege to go over your credit limit. Only if you elect to allow your creditor to approve overlimit transactions, will you be charged the overlimit fee.
Another change is that your credit card issuer will be limited to charging one overlimit fee per billing cycle. So if you make several transactions before realizing you’ve over spent, you can’t be charged a separate fee for each transaction.
Credit card issuers will also be prevented from charging consumers a fee to pay their credit card debt via telephone or internet. At present, some card issuers charge as much as $15 to accept a payment over the phone. You do need to watch the fine print on this one, because they will be allowed to charge a fee for expedited payments. You may still need to pay a day or two prior to your due date.
Payments received on the due date, or on the next day if the card issuer doesn’t accept payments on the due date, will no longer trigger a late fee. At present, paying on the correct day isn’t always enough – you may also need to pay before a certain time of day.
If the cardholder pays at a local bank branch, the payments must be credited the same day.
Under the new law, consumers will also have more time to receive a bill and return the payment. Present law requires the issuer to mail a statement 14 days before payment is due – which often means it doesn’t reach the consumer in time for a payment by return mail to post on time. The new laws requires 21 days.
The new law also sets limits on “fee-harvester” subprime cards. These cards typically have a credit limit of $250 to $500, and are issued to people who can’t get a standard card, but feel they must have a card in case of emergency. Unfortunately, the fees can sometimes leave cardholders with a hefty bill, and hardly any credit limit to use in an emergency.
In one example, a card featured a $250 credit limit, but new cardholders were automatically hit with a $95 program fee, a $29 account set-up fee, a $48 annual fee and a $6 monthly participation fee. That’s $178 in instant debt, and only $72 in actual credit. On top of that, because Federal laws preempt state laws, the card issuer has no limit on the interest rate it can charge on this balance.
Under the new law, during the first year after the card is issued, such fees may not exceed 25% of the cardholder’s initial credit limit.
