The Biden administration's new rule will cap credit card late fees at $8. It's the latest White House effort to crack down on what it calls "junk fees."
"We estimate banks are generating five times more in late fees than it costs to collect late payments," said President Biden during the announcement.
The Consumer Financial Protection Bureau estimates banks make about $14 billion a year in credit card late fees, with the average fee at $32.
Regulators estimate capping the fee at $8 would save consumers up to $10 billion a year.
"The average household will save $220 a year for the 45 million that pay late fees. So it's really going to help people who are struggling, including many people living paycheck to paycheck who are having trouble keeping up with their credit cards," said Chuck Bell, financial policy advocate at Consumer Reports.
"These can be like whack-a-mole sometimes, one goes down and another one comes up," said Ted Rossman, senior industry analyst at Bankrate.com.
Critics say there could be downsides to lowering the fees, like higher interest rates, lower credit lines or less access to credit cards in general.
"When it comes to late fees, I really think the best way to avoid it is to pay on time, or if it's an occasional mix-up, there's a good chance you can plead your case to the card company and they'll take that fee off," said Rossman.
Consumers who are habitually 30 days or more late paying their credit card bills face damaging their credit scores.
"Nobody wants to be late in making their payments, but they have other pressing things like rents and groceries to pay for. So people who are occasionally late shouldn't get clobbered by a fee of, you know, $41 or $32," said Bell.
It's a win for consumers, but with some cautions.
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