Payment card changes proposed by Biden would bring about $3 billion to U.S. consumers

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The Biden administration has capped credit card late fees to $8, a 75% reduction. The change could increase household spending by $2.7 billion annually and boost the U.S. economy. However, critics fear that credit card companies may raise fees to make up for the loss.

The Biden administration has put a new cap on late fees on credit card payments, and it could bring billions of dollars to Americans, especially those in low-income groups.

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On March 5, the Consumer Financial Protection Bureau finalized a new rule that limits late fees on credit card payments to $8 for the first violation and $41 for subsequent violations. This comes at a time when credit card interest rates and fees are rising, costing Americans more than $1,100 annually and resulting in record levels of credit card debt.

A new economic impact study provided to Business Insider by IMPLAN, an economic software and data analytics company, found that reducing credit card late fees could increase household spending by more than $2.7 billion annually. The study also predicts a $3.6 billion increase in U.S. GDP and support for nearly 34,000 jobs annually.

The new cap on penalties was part of the Biden administration's crackdown on "unnecessary fees," which are fees that can confuse consumers because they are implicit from the start. Business experts estimate that credit card late fees cost Americans about $12 billion annually, and the new rule could save them as much as $9 billion a year. The Consumer Financial Protection Bureau estimates that about 45 million people pay late fees each year, and that group could save up to $220 a year each.