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Wells Fargo is getting rid of penalty interest rates on credit cards. These are the higher rates imposed when customers are 60 days late. Customers will be notified of the change in their August statements.

The Background

Previously, Wells Fargo imposed a penalty rate of about 27 percent once customers were 60 days past due on payments.

The bank will no longer automatically hike interest rates. But if customers are chronically late, Wells Fargo may slash credit limits or even shut down accounts.

As with any other bank, Wells Fargo can still also hike rates on accounts whenever it wishes, as long as it gives customers 45 days notice.

The reprieve from penalty rates only applies as of July 6. Accounts that triggered penalty rates before that date will continue to be charged the higher rates.

Don't Forget the Fees

A late payment will still cost you.

Wells Fargo charges a late payment fee of $25 or the minimum payment due, whichever is less. If another late payment is made within six months, the late fee is $35 or the minimum payment due, whichever is less.

The previous late payment fees were as high as $39 for the first violation. But Wells Fargo lowered its penalty fees to keep in line with new regulations enacted this year.

Big Picture

Other new regulations that went into effect this year prevent banks from triggering penalty rates on existing balances, unless payments are at least 60 days late. If payments are made on time for six consecutive months, the original rate must be restored.

Wells Fargo is going one step further by eliminating penalty rates on new balances as well.