Cap On Late Fees Part Of New Credit Card Legislation Now In Effect

By Lacie Lowry, The News On 6

UNDATED -- The latest round of new credit card rules are now in effect.

This third phase is part of a major overhaul that began in February of 2009, aimed at giving consumers more protection against high interest rates and penalty fees.

Take your pick and charge that card. While you put it on plastic, be aware of some changes to your credit card.

The new rules include a late payment fee capped at $25, or $35 if there's a second violation in six months; no inactivity fees if you don't use your card; and a rate increase now requires an explanation to justify the hike and a re-evaluation every six months.

"That's great!" said Curt Francy, a credit card holder.

"That's going to help a lot of credit card users, because I know my interest rate just got higher and I canceled the credit card," Jolene Thompson, a credit card holder, said.

The Federal Reserve adopted the new rules to protect card users, but there are some catches.

2/23/2010 Related Story: What's in the new credit card law?

If your interest rate increases and is re-evaluated, the credit card company doesn't have to return you to your original rate. It can actually lower it as little as 1 percent.

For RaShaun Brewer, any changes come too late.

"I'm done with credit cards," said RaShaun Brewer, a cash-only consumer. "The interest rates are too high; I'm not fooling with those folks."

"It's a blessing, but you need to manage it," said Margo Mitchell, Credit Counseling Centers of Oklahoma.

Changes aside, credit counselors say financial literacy is key.

We encourage people to take control of their money instead of letting their money control them," Mitchell said.

The new law doesn't cover everything. Credit card companies can continue to close accounts and slash credit limits abruptly, without giving cardholders advance warning.