New credit card laws give rise to penalty rates

When the Credit Card Accountability, Responsibility and Disclosure Act forced credit card issuers to keep their penalty fees reasonable, some wondered how they were going to make up the money. The answer, it turns out, is penalty rates.

Unfortunately for consumers, there is nothing in the law that prevents credit card companies from putting hefty rates on those that pay their bills late. According to a report from MarketWatch, many of these penalty rates are a bit abstruse and vague, perhaps intentionally. One industry survey of these new fees found that six of the 10-largest credit card issuers in the country did a poor job at clarifying what triggered their penalty rate, what portion of the balance it affected, how to get back to the regular rate, and how those rates change after the first 12 months.

A new report from Bankrate said that a number of credit card disclosure rules recently went into effect, including one that mandates issuers present all fees and APRs on a statement in 16-point, bold font so that consumers can easily identify them.