The Credit Card Accountability Responsibility and Disclosure Act of 2009, commonly called the Credit CARD Act, is a federal law that limits how credit card companies can raise your interest rate, what fees they can charge, how they must bill you, and who they can issue cards to. It amended the Truth in Lending Act and applies to consumer credit cards used for personal, family, or household purposes. Business and corporate cards are not covered, which catches many cardholders off guard.
How the Law Limits Interest Rate Increases
Before 2009, an issuer could raise the rate on debt you had already run up for almost any reason. The Credit CARD Act shuts that door. An issuer cannot increase the APR on your existing balance except in four specific situations:1Office of the Law Revision Counsel. 15 USC 1666i-1 – Limits on Interest Rate, Fee, and Finance Charge Increases Applicable to Outstanding Balances
- A disclosed promotional rate ends and the rate reverts to the pre-disclosed post-promotional level.
- Your card carries a variable rate tied to a public index (like the prime rate), and the index moves.
- You complete or stop following the terms of a hardship or workout arrangement.
- You miss your minimum payment by more than 60 days, which allows a penalty rate.
The 60-day penalty rate has a built-in reset. The issuer must tell you about the increase and must reverse it if you make every minimum payment on time during the next six billing cycles.1Office of the Law Revision Counsel. 15 USC 1666i-1 – Limits on Interest Rate, Fee, and Finance Charge Increases Applicable to Outstanding Balances
A First-Year Rate Freeze on New Accounts
During your first 12 months with a new card, the issuer generally cannot raise the APR, fees, or finance charges at all. The four exceptions above still apply, but otherwise the terms you signed up for are locked in for a year.2Office of the Law Revision Counsel. 15 USC 1666i-2 – Additional Limits on Interest Rate Increases
45 Days’ Notice Before Any Future-Purchase Rate Hike
When an issuer raises the APR on future purchases (outside of index moves or the end of a disclosed promo), it has to send you written notice at least 45 days ahead. That notice must explain your right to cancel before the new rate begins. If you cancel, the issuer cannot demand the full balance immediately and must let you pay it off under reasonable terms.3Office of the Law Revision Counsel. 15 USC 1637 – Open End Consumer Credit Plans
What Fees Are Capped or Banned
Late Payment Fees
Penalty fees must be “reasonable and proportional” to the violation.4Office of the Law Revision Counsel. 15 USC 1665d – Reasonable Penalty Fees on Open End Consumer Credit Plans To make that concrete, the Consumer Financial Protection Bureau sets safe-harbor dollar amounts that issuers can charge without individually justifying the fee. The current safe harbors are $32 for a first late payment and $43 for another late payment of the same type within the next six billing cycles, adjusted annually for inflation.5Federal Register. Credit Card Penalty Fees (Regulation Z) A 2024 CFPB rule that would have dropped the safe harbor to $8 for large issuers was vacated by a federal court in April 2025, so the $32 and $43 figures apply to all issuers.
One additional limit matters in practice: a late fee can never exceed the minimum payment that was due. If your minimum was $25 and you missed it, the fee tops out at $25.
Over-Limit Fees
An issuer cannot charge you a fee for going over your credit limit unless you have specifically opted in to allow over-limit transactions. If you haven’t opted in, the transaction is simply declined and there is no fee.6eCFR. 12 CFR Part 1026 Subpart G – Section 1026.52
Inactivity Fees
Charging you a fee for not using your card is prohibited. Monthly fees tied to minimum transaction counts or spending amounts are no longer allowed.7Federal Register. Credit Card Penalty Fees (Regulation Z)
First-Year Fee Cap on High-Fee Cards
Total fees during your first year cannot exceed 25% of the card’s initial credit limit. Annual fees and monthly maintenance fees count toward that cap; late, over-limit, and returned-payment fees do not.6eCFR. 12 CFR Part 1026 Subpart G – Section 1026.52 The rule mainly protects people offered subprime cards with heavy upfront charges.
Billing and Payment Rules That Favor You
21 Days Between Statement and Due Date
Your issuer must deliver your statement at least 21 days before the payment is due, so you have real time to pay.8eCFR. 12 CFR Part 1026 Subpart B – Section 1026.5
A Due Date That Stays Put
The due date has to fall on the same day each month. If that day is a weekend or federal holiday and the issuer doesn’t process payments then, a payment received by the cutoff on the next business day is on time. The cutoff itself cannot be earlier than 5:00 p.m. on the due date.9Office of the Comptroller of the Currency. Why Is My Credit Card Payment Due on a Holiday?
Extra Payments Attack Your Highest Rate
Anything you pay above the minimum must be applied to the balance carrying the highest interest rate first.10eCFR. 12 CFR 1026.53 – Allocation of Payments If you have $3,000 in purchases at 18% APR and $1,000 in cash advances at 26% APR, your extra dollars go against the 26% balance. Before the Credit CARD Act, issuers routinely did the opposite, which kept expensive debt on your account longer. A special version of this rule applies in the last two billing cycles of a deferred-interest promotion: extra payments during that window must go to the deferred-interest balance first, giving you a chance to clear it before back-interest gets tacked on.
Special Rules for Applicants Under 21
An issuer generally cannot open a credit card account for someone under 21 unless the applicant shows an independent ability to make the minimum payments, or has a co-signer over 21 who accepts liability.11Consumer Financial Protection Bureau. Can a Credit Card Company Consider My Age When Deciding to Lend Me a Card? “Independent ability” means actual income or assets, not projected future earnings. When there is a co-signer, the issuer cannot raise the credit limit without the co-signer’s written consent.
The law also bars card companies from offering physical incentives (t-shirts, food, gift cards) to college students who apply on or near a campus or at campus-affiliated events.12Consumer Financial Protection Bureau. 12 CFR Part 1026 (Regulation Z) – Section 1026.57 Discounts, rewards, and promotional credit terms don’t count as physical items. Issuers must also disclose their marketing agreements with colleges.
Ability-to-Pay Applies to Everyone
The under-21 rules get most of the attention, but every applicant is covered by an ability-to-pay standard. Before approving a new account or a credit-limit increase, the issuer must evaluate whether you can afford the minimum payments based on your income or assets and your existing debts.13eCFR. 12 CFR 1026.51 – Ability to Pay The issuer has to consider at least one of three measures: your debt-to-income ratio, your debt-to-asset ratio, or the income left after your existing obligations.
The Warnings on Your Monthly Statement
Every statement must carry a “Minimum Payment Warning” showing how long it would take to pay off your current balance if you only paid the minimum, plus the total interest that would cost.3Office of the Law Revision Counsel. 15 USC 1637 – Open End Consumer Credit Plans Right beside it, the statement must show the fixed monthly payment that would clear the balance in 36 months and the total interest under that faster schedule. Both figures have to appear prominently, not in fine print.
Gift Card Rules
The Credit CARD Act also set federal minimums for gift cards, store gift cards, and general-use prepaid cards. A gift card cannot expire sooner than five years after it was issued or last reloaded.14Office of the Law Revision Counsel. 15 USC 1693l-1 – General-Use Prepaid Cards, Gift Certificates, and Store Gift Cards Some states go further, but five years is the federal floor.
Dormancy or inactivity fees are allowed only if the card has gone unused for at least 12 months, no more than one such fee is charged per month, and the fee amount and frequency are printed on the card itself.15eCFR. 12 CFR 1005.20 – Requirements for Gift Cards and Gift Certificates A single use inside a 12-month window resets the inactivity clock.
What the Law Does Not Cover
The Credit CARD Act covers consumer credit cards. Business and corporate credit cards fall outside its protections, so the rate rules, fee caps, billing timelines, and payment-allocation requirements described above do not apply to a card issued as a business account.16Consumer Financial Protection Bureau. 12 CFR 1026.2 – Definitions and Rules of Construction Small business owners who put business expenses on a personal card generally keep the protections, but a card explicitly labeled a business account does not carry them.
Debit cards and prepaid debit cards used for everyday spending are governed primarily by the Electronic Fund Transfer Act, not the Credit CARD Act. Gift cards are the exception, since the Credit CARD Act specifically reached into that category.
How to Enforce Your Rights
The Consumer Financial Protection Bureau is the primary federal enforcer. You can file a complaint through the CFPB’s online portal or by calling (855) 411-2372. The CFPB forwards the complaint to your issuer, which typically responds within 15 days and must give a final response within 60 days. Your complaint (stripped of personal details) is published in the CFPB’s Consumer Complaint Database.17Consumer Financial Protection Bureau. Learn How the Complaint Process Works
You also have a private right to sue under the Truth in Lending Act. In an individual case involving a credit card, you can recover your actual damages plus statutory damages between $500 and $5,000, along with attorney’s fees and court costs.18Office of the Law Revision Counsel. 15 USC 1640 – Civil Liability Class actions are capped at the lesser of $1,000,000 or 1% of the issuer’s net worth. The clock is short: you generally have one year from the date of the violation to file suit.