A new $8 cap on credit card late fees is touted as helping more than 45 million credit card holders save an average of $220 annually, but will it really?
Reviews are mixed for the Consumer Financial Protection Bureau’s (CFPB) latest move to kill “junk fees.” The average credit card late fee has ballooned to $32 in 2022 from $23 at the end of 2010, the CFPB said. With the cap going into effect, the agency estimates Americans will save more than $10 billion a year.
But some financial experts warn the savings and benefits may not last.
“The reality is that (capping late fees) will also increase the likelihood that banks raise other types of fees to make up for the lost revenue,” said Matt Schulz, chief credit analyst at financial products comparison site LendingTree.
What is the CFPB rule on credit card late fees?
Only the largest issuers, with at least a million open accounts, must cap late fees to $8 per incident. They also can’t raise the fee after the first incident or adjust it higher annually for inflation, the CFPB said.
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Banks currently can charge $25 for the first late payment, and $35 for subsequent late payments, with both amounts adjusted for inflation each year, the CFPB said.
“Those amounts have ballooned to $30 and $41, even as credit card companies have moved to cheaper, digital business processes,” the agency said.
Under the new rule, which goes into effect 60 days after its publication in the Federal Register,…
