Chris O'Shea
The Consumer Financial Protection Bureau (CFPB) has made a big move. The agency has announced that late fees for credit cards must be capped at $8. The rule is estimated to save consumers about $220 million per year. Here’s what you should know about the rule and how it could impact you.
The Basics
The CFPB’s rule means the biggest card issuers must cap late fees at $8. Before this ruling, credit card companies could charge up to $25 for the first late payment, then $35 for each subsequent one. They could also change the fee to adjust for inflation. That meant some companies were charging up to $41 late fees. The new rule will cap fees at $8 and not allow companies to adjust for inflation.
The Good
The new rule will help consumers who miss credit card payments. Instead of dealing with a huge, double-digit late fee right off the top, the capped fee will give consumers a fighting chance of paying off their balances.
The Bad
Unfortunately, when dealing with credit card companies, you have to keep in mind that they are businesses first and foremost. The capped late fees might sound great, but the reality is that card companies may raise other fees to make up for the lost revenue. One area to watch is balance transfer fees.
Do One Thing: Keep a close eye on your credit card terms once the new rule goes into effect.
