The Rule Capping Credit Card Late Fees at $8 Has Been Scrapped

In March 2024, the Biden administration introduced a rule capping credit card late fees at $8. Almost immediately, lawsuits followed.

Now, a federal judge has granted a request to block the rule, agreeing with the plaintiffs that the fee cap was illegal.

So, what happens with credit card late fees now? And how can you avoid them?

The Short Life of the $8 Credit Card Late Fee

As part of his administration’s fight against so-called “junk fees,” President Joe Biden and the Consumer Financial Protection Bureau (CFPB) introduced a cap on credit card late fees in March 2024. If you paid your bill late, the maximum fee the card issuer could charge under this rule would be $8 — an amount the Biden administration believed was still sufficient for credit card issuers to recoup their costs associated with late payments.

That same month, banking groups and the U.S. Chamber of Commerce sued to block the rule. These groups alleged that $8 late fees weren’t sufficient to cover the costs incurred by financial institutions and that banks would need to cut benefits or increase fees for all customers — something unfair to those who paid their bills on time — to recoup their losses. At the time, the CFPB pledged to defend the rule, saying it “closes a longstanding loophole abused by credit card giants to turn late fees into a major revenue stream.”

Fast forward to a new presidential administration, and the CFPB joined the suit to block the rule.

Now, U.S. District Judge Mark Pittman in Fort Worth, Texas, has granted the request to scrap the rule, agreeing with the plaintiffs that the rule was illegal. Pittman stated that the rule violated the Credit Card Accountability and Disclosure Act of 2009 by prohibiting credit card issuers from charging fees “reasonable and proportional to violations.” Pittman is the same judge who blocked the student loan forgiveness plan.

The plaintiffs responded to the ruling by saying it was “a win for consumers and common sense.”

How To Avoid Credit Card Late Fees

Credit card late fees average more than $30; the rule to cap them at $8 has been removed.

However, the change in this rule only applies to late fees on your credit card bill. So long as you make your minimum payment on time, these fees won’t apply to you.

Of course, credit cards have other fees: annual fees (on some cards), interest (if you don’t pay your full balance each month), and cash advance fees, to name a few.

Final Thoughts

A federal judge has struck down a rule capping credit card late fees at $8. The rule was determined to be illegal, and late fees will stay at their previous levels — typically more than $30 for those who fail to make their minimum payments on time.

However, if you make your credit card’s minimum monthly payment before the deadline, the change in fees will not affect you.