Credit Card Late Fees Charged Capped

The Biden administration announced a rule Tuesday to cap all credit card late fees at $8, or about one-quarter of the average late fee of $32. It's the latest effort from the White House to attack what it calls "junk fees," or excessive fees that can push up the end price of products.

Why the Change?

The CFPB acted to address what it saw as excessive late fees. Prior to the change, some fees could reach as high as $41. The goal is to make fees more reasonable and proportionate to the actual cost of late payments for credit card companies.

When Did This Take Effect?

The rule is relatively new. While it was announced in early 2023, it is expected to be in full effect by early 2024.

Important Note: While the $8 cap is significant, it's still crucial to make credit card payments on time. Late payments can still negatively impact your credit score and lead to additional interest charges.

The New Rule:

• The Cap: Late fees for most credit card payments are now capped at $8.
• Exceptions: Some larger credit card issuers can still charge higher fees, but they must prove that the higher amount is necessary to cover the costs associated with collecting late payments.
• Savings: The Consumer Financial Protection Bureau (CFPB), which implemented the rule, estimates this could save consumers up to $9 billion annually.