Gerald Beauchesne, 71, a Baltimore property inspector who owns his own business, said he carefully studies his credit card bills to make sure he is not charged any added fees. He said he prefers to use cash whenever he can.
"I don't really trust the credit card companies," Beauchesne said. "They always sneak in those little rates."
The proposed regulations would require banks to give consumers a reasonable amount of time to make payments before charging late fees, which can be as much as $40. Bills would have to be sent at least three weeks before the payment due date. Consumer groups have complained that banks routinely shorten the payment window, snaring customers who are slow to drop their checks in the mail.
The Fed also seeks to stop banks from applying a customer's payment to the portion of their debt that carries the lowest interest rate, even though the borrower has balances with higher rates.
It's common for banks to charge customers different interest rates on the same card.
For example, some cards offer a low introductory rate on balance transfers, but charge a higher rate on new transactions. Cash advances also carry a higher interest rate. When a customer pays less than the full balance on their card, many companies will apply the payment to the low-rate balance first and let the higher-rate balances grow.
The proposed regulations would also prevent banks from arbitrarily raising a customer's interest rate on existing balances.
Travis Plunkett, legislative director for the Consumers Federation, noted that many banks will boost the interest rate if they learn a customer's credit score has fallen, or if they missed payments to another, unrelated lender.
Richard Davis, formerly of Severna Park, said he was stunned when his bank tripled the interest rate on his credit card last fall to 24 percent, claiming that it had "negative information" about his credit rating.
Davis, 37, said he had just checked his credit report, finding he had a credit score of 720 - a level considered better than average. And he had never missed a payment on the card in question - something a bank representative acknowledged. But when he pressed the bank to give him a reason for the rate increase, he hit a wall.
"They would never tell me," said Davis, who recently married and now lives in Centreville, Va. "To this day, I don't know."
