On Tuesday rules have been proposed by the Federal Reserve to end banks’ ability to apply credit card payments to balances having lowest interest rates first, implementing legislation Congress passed in May.

The Fed also proposed that before charging fees for transactions that exceed credit limits creditors obtain consumers’ consent. The Fed said in a statement that restrictions on lending to people under the age of 21 and subprime credit card fees were also included.

Rate increases on fixed-rate accounts

In the first year after an account is opened, the Fed’s proposal would generally prohibit rate increases on fixed-rate accounts as well as increases on existing credit card balances. Cards could not be issued for consumers under the age of 21, unless the borrower could show an ability to repay the debt or an older person agreed to back the account.

Description of the rules in the Federal Register

According to a description of the rules in the Federal Register, during the first year after the account is opened fees on subprime credit cards, those issued to consumers with lower credit scores, would be capped at 25 percent of the account’s credit limit.

Related Articles

• Credit Cards with Poor Credit History
  People with bad credit find it is difficult to take out loans. This is because usually lenders avoid such people who have bad credit and this is due to the low chances of getting their loans repaid by such borrowers....
• Credit Cards from Bank America
  You must acquire type of credit card that you can purchase with your cash resources and that also fulfills your needs. There is actually large range of cards available in the market. You may either choose one card or a combination of these to maximize you...
• Fed’s Upcoming Mortgage Agency Purchases; Fed Funds are At 0.1562%
  On Friday the Federal Reserve has made plans for buying agency mortgage debt maturing between December 2010 and November 2011......
• Tougher Terms Ahead For Credit Card Users
  Federal Reserve has stated that banks are planning to intensify terms on credit cards in response to a recent law that is specifically designed to protect consumers from unexpected increase in rates....
• Fed – Loan Demand Fell, Lending Standards Tight
  According to the Federal Reserve, the overall demand for most types of U.S. bank loans has fell greatly during the past three months, whereas the percentage of banks that were tightening their lending regulations and standards has declined from the peaks ...