What is the latest on consumer credit card debt and federal laws on credit card interest rate limits? We go through each in this article. Let's get started.
The CFPD Rule
The Consumer Financial Protection Bureau (CFPD) wants to ban excessive credit card fees. Their efforts could reduce excessive late fees by up to $9 billion annually.
Congress tried this in 2009 with the Credit CARD Act. Due to an immunity provision instituted by the Federal Reserve Board of Governors, card companies were able to find loopholes in the Act, allowing them to dodge enforcement standards.
Currently, credit card companies can charge $30 for the first late fee and $41 for subsequent late payments within six billing cycles.
It may be surprising to learn that there is virtually no cap on credit card interest rates. In August of 2023, the average consumer credit card rate was 21%, according to Federal Reserve data. Some store and retail cards charge up to 30%.
Sen. Josh Hawley, R-Mo., wants to change this. He introduced the Capping Credit Card Interest Rates Act in September. It would impose a maximum 18% interest rate, as reported by CNBC.
$1 Trillion in Credit Card Debt
For the first time, credit card debt hit $1 trillion in the second quarter of 2023. How did we get here?
There are a few factors that have led to the current record credit card debt. Inflation is increasing, and so are prices. However, consumers are still spending and, in the process, racking up credit card debt. Additionally, interest rates have risen the fastest in history. For those consumers unlucky enough to hold a balance, these high-interest rates are helping their credit card debt to grow even faster.
Tips for Lowering Your Credit Card Debt
Credit card debt can spiral out of control. Continuing to pay it down is the best way to keep it under control. Here are a few ways to stay on top of your credit card debt.
1.) Overpay - pay well above the minimum amount. This will help in covering monthly interest.
2.) 0% Balance Transfer - if you have high credit card interest rates, it can help you pay them down quicker by shifting some high-rate balances to a 0% rate. However, the last thing you want to do is transfer a balance from a high-rate card just so you can add more charges to it.
3.) Set all your credit card accounts on autopay, even those with no balances. This will ensure you don't incur late fees, which will just add more to your credit card balance.
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