New rules limit fees on credit card users

The final phase of the landmark federal legislation that placed new restrictions on credit card interest rates and fees took effect Sunday. Alhough most of the law's provisions were enacted earlier this year, there are still a few important changes to be aware of:

Limiting penalty fees. The law required the Federal Reserve to write regulations outlining how much credit card companies charge you for things such as late payments or over-the-limit purchases. The new rules ban them from charging fees that are larger than the infraction. For example, if you are late on a $20 payment, the penalty cannot be more than $20. Or, if you spend $5 more than your max, the penalty cannot be more than $5.

Banning certain fees. Issuers will no longer be able to charge you an inactivity fee for not using your card. They also can charge you only one fee per infraction. So if you make one late payment, they can ding you only once.

Containing rate increases. If a credit card company raises your interest rate, it will have to tell you why. In addition, if your rate increases, the issuer must re-evaluate it every six months. If you deserve to have it lowered, the card company must lower it within 45 days of the evaluation. Previously, if a credit card company hiked your rate, there was no obligation for it to reconsider.

Regulating gift cards. The law established new protections for store gift cards, which can be redeemed only at one retailer, and prepaid gift cards, which may be used at many locations.

All gift cards sold starting Sunday must be good for at least five years. In fact, if you have a gift card with an earlier expiration date, any unspent money left on the card must be honored for at least five years. You can request a replacement for any expired gift card for free.

Consumers have long complained about the number of fees on certain gift cards. Under the new law, only one fee per month can be charged, and dormancy fees can be assessed only if you haven't used your card in a year.

However, you will still have to pay to buy certain types of gift cards. The law also does not cover gift cards that come as part of reward or promotional programs and reloadable prepaid cards that act as replacements for checking accounts.