Is it Legal to Charge a Credit Card Fee?

Credit card companies use different methods to encourage customers to pay their bills on time. Usually, if a person does not pay her bill on time, a credit card company assesses that person a fee. This fee, as with the debt that the person accrued, will be charged interest. In addition, a company may raise the amount of interest the person is required to pay. Credit card fees, although annoying, are usually legal.

Fees

Credit card companies charge clients several different fees. However, the most common fee is the late fee, which is assessed to a client if the client does not make the minimum payment by the due day. When the client took out the card, he signed a contract outlining the fees he would pay in the event of late payment. As long as the fees assessed are consistent with this contract, they are legal.

Interest

In lieu of fees, a company can increase the interest rate that a card holder pays on the loan. This interest rate hike is equivalent to a fee, as it is applied retroactively to the outstanding balance on the account. So, if a person owed $1,000 on a card and the card company raised her interest rate by 10 percentage points as a penalty for late payment, the person would owe the equivalent of a $100 fee.

Laws

If a company assigns fees consistent with a signed contract and that contract is legal, then the fees are legal. However, both state and federal laws regulate the size of flat late fees and the interest rate hikes. These limits vary by state. As of January 2011, a credit card company could charge a maximum interest rate of 29.99 percent and assess a maximum late fee of $35.

Interchange Fee

In addition to fees, credit card companies also typically charge merchants to process transactions using a credit card or a check card. These fees are interchange fees and vary widely depending on the company that charges them. Unlike fees assessed to consumers, there is no maximum limit on the interchange fees. However, excessive interchange fees may cause the merchant to not accept the company's card.