7 Things Credit Card Issuers Can’t Do

Credit card issuers have a reputation for abusive  practices. However, recent changes to  law prevent issuers from doing several things that take advantage of consumers.

Charge an excessive late fee. Recent changes to the law prevent issuers from charging high late fees. Now, your creditor can charge a maximum late fee of $25 or $35 if you’ve been late within the past six months. Not only that, your late fee can’t be higher than the minimum payment you missed. So, if the payment you were late on was just $10, your late fee can only be $10.

Charge a late fee on the days they don’t accept payments. Sometimes due dates fall on holidays or weekends and the card issuer doesn’t process payments on those days. If your due date falls on a day like that, the creditor can’t charge a late fee as long as your payment is received on the next business day by 5 pm. Don’t assume that just because it’s a weekend or holiday, your creditor doesn’t process payments. Some creditors still accept online or phone payments on those days.

Raise the interest rate on your existing balance. In most cases, the credit card balance you’re carrying now is protected from interest rate increases. However, there are some exceptions, like when you have a variable interest rate and the underlying interest rate changes. Credit card issuers can also raise your interest rate if you’re more than 60 days behind on your payment or if you had a promotional rate that just expired.

Charge interest on balances you’ve already paid. A few years ago, some credit card issuers used a finance charge calculation method known as double cycle billing. With this method, credit card issuers would use charge interest on last month’s balance as well as the current month’s balance. If you paid down your balance significantly, your interest would still be high. Credit card issuers are no longer allowed to do this.

Give a credit card to a young adult without income. Credit card issuers are now required to decline college students who apply for a credit card but don’t have a job. Creditors are now required to get proof of steady income from young adults under age 21. If the applicant doesn’t have sufficient income to qualify for the credit card, they must get a co-signer before they can be approved for the card.
Send your bill too close to the due date. Credit card issuers must give you enough time to pay your credit card balance. So, they’re required to send your credit card statement at least 21 days before the due date. Previously, credit card issuers only had to mail the statement 14 days before the due date. The extra time lets you take advantage of your grace period and avoid interest charges.

Charge an over-the-limit fee if you haven’t agreed to have those charges go through. Before you can be charged an over-the-limit fee, you must have opted-in to have over-the-limit transactions processed. Otherwise, any transaction that would put you over your credit limit would be denied.