The Federal Reserve has introduced new rules in order to protect the credit card holders from getting hammered by the penalty fees and lofty late payment charges.

The new rules will respond to public and the congressional outrage on practices by the credit card firms. The new rules will prevent the credit card companies from charging penalty fee more than 25 dollars for late payment of the existing bill.

They have also banned the fees called inactivity which has been implemented if a customer does not use the account for new purchase and also prevented from paying multiple penalty fees on a single late payment.

These rules will take effect from 22nd August 2010. Finally, the credit card users will be protected from the credit card companies' abuses.

Adding to that, the rules will allow the companies to review their interest rates applied to the customer since the start of last year. These rules are also designed to protect the customers from sudden rise in interest rates. The Congress has directed the Federal to use the new rules of credit card protections in legislation passed into law by the US President Barack Obama.