As a result of the Credit Card Accountability, Responsibility, and Disclosure Act (the Credit Card Act) on August 22, 2010 new credit card rules passed by the Federal Reserve go into effect. The new rules were passed to give more protection to consumers from their credit card companies and more transparency. Under the new rules penalty fees are reduced or eliminated and interest rate increases must be explained to customers and evaluated every six months. Here is a rundown of how the new credit card rules will effect consumers.

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Penalty Fees

- late payment fees will be reduced to a maximum of $25 from the prior max of $39. Credit card companies can only charge you more than $25 if you have missed at least one payment in six months in which case they can charge $35. The only way a credit card company can charge you more is if they can show their costs as a result of your missing a payment are higher.

- in addition credit card companies can no longer charge fees above your minimum payment. If you minimum payment is $20 that is the most they can charge you for a late fee. And if you exceed your credit limit they cannot charge more than the amount you exceeded your limit by as an over-the-limit fee. If you exceeded the limit by $10 that is the most they can charge you.

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Additional Fee Protections

- credit card companies can no longer charge inactivity fees.

- you cannot be charged more than one fee per event or transaction. If you miss a payment you can only be charged one fee for that missed payment.

Explanation of Interest Rate Increase

- when your credit card company wants to increase your Annual Percentage Interest Rate (APR) they must explain why they are doing so.

Re-evaluation of Recent Interest Rate Increases

- under the new rules your credit card company must re-evaluate any interest rate increase every six months and reduce your interest rate within 45 days of re-evaluation if appropriate.

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The best protection from credit cards companies is competition. If you are a good customer and they want your business they will waive late fees and penalties to keep your business if you have somewhere else to go. For example: if American Express refuses to waive a late fee close your account with them and go to Discover Card or another company.

For more see Why Consumer Credit and Credit Card Debt Keeps Dropping in the United States

Sources:http://www.federalreserve.gov/consumerinfo/wyntk_creditcardrules2.htm