Credit Card Late Fees Capped at $8: What You Need to Know

Credit card late fees have been a source of frustration for many of us, but the good news is that they're about to get a whole lot more manageable. As of now, credit card late fees are capped at $8, which is a significant reduction from the previous maximum of $28.

This change is a result of new regulations aimed at protecting consumers from unfair fees. The idea is to prevent credit card companies from taking advantage of people who are already struggling to make payments.

The $8 cap applies to all credit card late fees, including those for missed payments, overdrafts, and other types of fees. This means that regardless of your credit card issuer, you can't be charged more than $8 for a late payment.

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The new rule capping credit card late fees is a game-changer for consumers. This rule change will affect credit card issuers with more than 1 million open accounts, which account for 95% of outstanding credit card balances in the US.

The maximum late fee has been cut to $8, a significant reduction from the previous average of $32 in 2022. This change will help consumers save money, as the CFPB forecasts that consumers will save an average of $220 per year.

The CFPB will no longer allow automatic increases in late fees, which were often raised without evidence of increased costs. Instead, the agency will monitor economic conditions and adjust the dollar threshold when necessary.

Here's a breakdown of the key changes to the late fee cap:

These changes will be effective 60 days after the rule is published in the Federal Register.

Smaller card issuers with fewer than 1 million open accounts are exempt from the new rule capping credit card late fees at $8. This means if you have a card offered by a smaller bank or credit union, your late fee may not be affected.

Larger card issuers can charge more than $8 if they can prove they need to charge more to cover their actual collection costs. The CFPB allows them to do this, but they must provide evidence to support their claim.

The new rule doesn't apply to credit card issuers with fewer than 1 million open accounts, which account for a small portion of the total outstanding credit card balances in the U.S. This is according to the CFPB, which oversees banks, credit card companies, and other financial institutions.

Here are the two exceptions to the new rule:

Credit card late fees are capped at $8, but it's still crucial to make timely payments to avoid other consequences. Setting up automatic payments is a great way to ensure you never miss a payment.

You can usually opt to pay the minimum amount due, the statement balance, the current balance, or another amount through autopay. Just make sure you always have sufficient funds in your checking account to cover your costs.

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Requesting alerts from your credit card issuer can also help you stay on top of payments. Credit card issuers typically allow you to set up alerts via email or text.

Changing your payment due date might be a good idea if your card's due date doesn't align with your payday or you have multiple cards with different due dates. This can help you avoid late fees and make payments more manageable.

Some credit cards don't charge late fees, so it's worth shopping around for one that fits your needs. Opting for a card with no late fee can give you more peace of mind and help you avoid unnecessary fees.

If you're struggling financially and need help, contacting your card issuer is a good idea. Many card issuers offer hardship programs that can provide relief and help you avoid late fees.

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Credit card late fees have been a significant burden for many Americans, with late fees costing households over $14 billion a year.

The Credit Card Accountability Responsibility and Disclosure Act of 2009, or CARD Act, was supposed to protect consumers, but it had a loophole that allowed larger credit card issuers to automatically raise their fees for inflation.

These larger issuers account for more than 95% of outstanding credit card balances, according to the Consumer Financial Protection Bureau, or CFPB.

Late fees have increased steadily since the CARD Act was passed, from an average of $23 at the end of 2010 to $32 in 2022.

The CFPB alleges that some credit card companies have made late fees a key part of their profit model, raising them without evidence of increased costs.

The new rule change aims to close this loophole and prevent automatic fee increases, instead monitoring economic conditions and adjusting the dollar threshold when necessary.

The CFPB estimates that the new regulation will save consumers over $10 billion annually, with the 45 million Americans charged late fees seeing an average savings of $220 a year.

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Credit card late fees have been capped at $8, but this move may have unintended consequences.

Issuers may end up raising other fees to make up for the lost revenue.

The Consumer Financial Protection Bureau implemented this cap as part of the Biden administration's effort to eliminate junk fees.

We've seen this movie before – in 2010, Senator Dick Durbin capped debit card interchange fees, but merchants pocketed the savings and consumers faced higher overdraft fees.

Lowering credit card fees can lead to higher interest rates and fees in other areas.

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