New government regulations are slashing the late fees charged by many credit card companies.
On March 5, 2024, the Consumer Financial Protection Bureau (CFPB) finalized a rule limiting the penalty for late payment to $8 per incident, down from an industry average of $32. It is expected to go into effect 60 days after its publication in theFederal Register.
Find the best debt relief providers
Capping credit card late fees
The new rule change closes a loophole established by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) that allowed companies with at least a million open accounts to automatically adjust their fees for inflation.
These larger card issuers account for more than 95% of outstanding credit card balances, according to the CFPB, an independent federal agency that oversees banks, credit card companies, debt collectors and other financial institutions.
In a statement, the CFPB said many issuers raised their penalties each year like clockwork "without evidence of increased costs."
Late fees have steadily increased since the passage of the CARD Act, according to the CFPB, from an average of $23 at the end of 2010 to $32 in 2022. The bureau alleges some credit card companies have made them a key part of their profit model.
Instead of allowing automatic increases, it said it would monitor economic conditions and adjust the dollar threshold when necessary.
The CFPB also made it clear that this rule doesn't change issuers' ability to raise interest rates, reduce credit lines or take other actions to deter late payments.
Credit cards with no late fees
Several cards have done away with late fees altogether, including the Citi Simplicity® Card. The card also has no annual feeand nopenalty APR, so your interest rate won't spike if you're late with a payment. Further, it also offers a long 0% intro APR for 21 months on balance transfers from the date of the first transfer and 0% intro APR for 12 months on purchases from the date of account opening (19.24% - 29.99% variable after; balance transfers must be completed in the first four months).
Citi Simplicity® Card
On Citi's secure site
Rewards
None
Welcome bonus
None
Annual fee
$0
Intro APR
0% Intro APR for 21 months on balance transfers from date of first transfer and 0% Intro APR for 12 months on purchases from date of account opening.
Regular APR
19.24% - 29.99% variable
Balance transfer fee
There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
Foreign transaction fee
3%
Credit needed
Excellent/Good
See rates and fees. Terms apply. Read our Citi Simplicity® Card review.
If you want to dodge late charges and still enjoy rewards, the Discover it® Cash Back card waives your first late fee and offers up to 5% cashback (on up to $1,500 worth of combined purchases, then 1%) on rotating quarterly categories and 1% back on all other purchases (activation required). It also offers a welcome bonus in which Discover will match all the cash back earned by the end of your first year as a cardholder.
This card, too, has an introductory APR offer, which can help keep your monthly bill from spiraling out of control. Cardholders can enjoy a 0%intro APR for 15 months from the date of account opening for purchases and balance transfers (after, 18.24% - 28.24% variable APR).
Discover it® Cash Back
On Discover's secure site
Rewards
Earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases-automatically.
Welcome bonus
Discover will match all the cash back earned for all new cardmembers at the end of your first year.
Annual fee
$0
Intro APR
0% for 15 months on purchases and balance transfers
Regular APR
18.24% - 28.24% Variable
Balance transfer fee
3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*
Foreign transaction fee
None
Credit needed
Good / Excellent
*See rates and fees, terms apply.
Read our Discover it® Cash Back review.
A broader push to eliminate 'junk fees'
Late fees cost American households more than $14 billion a year, according to the CFPB.The bureau estimates consumers will save over $10 billion annually, thanks to the new regulation, and that the 45 million Americans charged late fees will see an average savings of $220 a year.
The fee cap is part of the Biden administration's ongoing war on "junk fees," a catch-all for what the Federal Trade Commission calls"unnecessary, unavoidable or surprise charges that inflate costs while adding little to no value."
It won't affect issuers' ability to raise interest rates, reduce credit limits, or take other steps to discourage delayed payments.
In January 2024, the CFPB also proposed regulations to limit overdraft fees, but it has not finalized them.
Subscribe to the CNBC Select Newsletter!
Money matters —so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox.Sign up here.
Bottom line
Credit card late fees have soared in recent years, saddling millions of Americans with additional debt. As part of the Biden administration's effort to eliminate junk fees, the Consumer Financial Protection Bureau has capped late fees at $8. On the flip side, credit card issuers may end up raising other fees or tightening card approvals to make up for this.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every credit card article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit card products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
Catch up on CNBC Select's in-depth coverage ofcredit cards,bankingandmoney, and follow us onTikTok,Facebook,InstagramandTwitterto stay up to date.
Read more
What happens if you miss a credit card payment?
The best credit cards with no late fees
Here's how long a late payment stays on your credit report
These checking accounts don't charge overdraft fees
For rates and fees of the Discover it® Cash Back, click here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
