Fee Limit, Universal Default and Double Billing – CARD Act 2010

Limits on Initial Fees for Subprime Credit Cards

During its first year, any fees charged by a subprime credit card cannot exceed 25% of the credit limit. On a credit card with a $400 credit limit, total fees charged when the credit card is opened cannot be more than $100. This excludes late payment fees, over-the-limit fees, and returned check fees.

No More Universal Default or Double Billing Cycle Finance Charges – CARD Act 2010

Universal Default is banned

Universal default is a clause within your credit card agreement that allows your card issuer to raise your interest rate at any time for any reason. Credit card issuers have used this clause to apply the penalty interest rate when you’ve been late on a payment to another credit card. The CARD Act bans universal default.

Billing Statements Must Include Late Payment Deadlines and Penalties – CARD Act 2010

Double Billing Cycle Finance Charges Are Banned

The double billing cycle method of calculating finance charges is illegal under the CARD Act. Credit card issuers can no longer charge interest on balances from a previous billing cycle. They also cannot charge interest on balances that have already been paid. An exception is made for finance charges on balances that were part of a billing error dispute or a finance charge charged for a returned check.

On credit accounts that charge a late fee for late payment, the billing statement must include the payment due date (or date the late fee will be charged) along with the amount of the late fee. If a late payment will result in an interest rate increase, that fact along with the amount of the interest rate, must be listed on the billing statement. Both pieces of information must appear in a location that the cardholder can find and read them.