Central Fidelity National Bank has put its card customers on notice: The penalty for paying late or spending beyond the credit limit just got tougher.

In line with a growing trend to discipline cardholders while creating a new revenue opportunity, the bank has reduced the grace period for late payments for some customers and eliminated low teaser rates when customers exceed their credit limits.

"We wanted to ensure that customers who make their payments on time are not carrying the cost of maintaining accounts that were over the limit or in arrears," says Betsy Wells, senior vice president and marketing manager for retail lending at Richmond, Va.-based Central Fidelity.

The $10.5 billion-asset regional, which has $800 million in card outstandings, has sent pricing notices with recent statements to three-quarters of its cardholders.

Major issuers such as First Chicago Corp., Capital One Financial Corp., and Wachovia Corp. have also taken so-called risk-based pricing steps in the face of rising delinquencies.

Bankers view these measures as a way to reward responsibility and penalize bad credit behavior. But critics, who tend to represent consumer groups, complain about "penalty pricing," which they see as a trap for customers and a profit play by banks.

"Penalty pricing is part of a pattern that financial institutions are using to increase balances and consumer credit risk," said Janice C. Shields, consumer research director at the Public Interest Research Group in Washington.

"Customers are encouraged to increase their debt with increased credit limits, and then if they are a few days late with their payment or over the limit they are hit with exorbitant payments," Ms. Shields said.

Central Fidelity cardholders who fail to make minimum payments in two billing cycles and who maintain balances that exceed their limits will automatically incur fees and higher interest rates.

Central Fidelity said it instituted these changes after a survey

found that competitors were giving cardholders less leeway.

Customers paying Central Fidelity's introductory 9.9% rate will be assessed the standard interest rate - prime plus 5.9%, or 14.15% - if they fail to make the minimum payment for two consecutive billing cycles or exceed their credit limit by more than 15% at the end of the billing cycle.

A $15 fee will be billed to the account if the minimum payment is not received within three days of the due date, and a $20 fee will be charged for accounts exceeding the credit limit.

Ruth Susswein, executive director at Bankcard Holders of America, a consumer advocacy group in McLean, Va., finds risk-based pricing a greedy strategy.

"I am not suggesting that people go over their limit," said Ms. Susswein, "but I find it appalling that banks are penalizing customers for something that the bank can control. The banks authorize over-limit transactions and then levy hefty prices as a punishment for those actions."

Ms. Shields said: "People don't shop for credit based on late fees or over-the-limit charges, because they don't think that they are going to be in that situation. Banks lure them with teaser rates and waive annual fees, but then consumers often are hit with double charges if they are even a penny over their limit."

"Punitive rates have become the way of doing business for major card issuers such as AT&T and Citibank in the past year," said Robert B. McKinley, president of RAM Research Group.

Mr. McKinley said that although it is reasonable to expect risky people to bear more of the cost burden, the process of assessing fees can put issuers in "a Catch-22," from an image standpoint.

"In the 1980s banks used the policy of one-size-fits-all when they set interest rates," Mr. McKinley said. "Now there is more tiered pricing, with banks not willing to lock themselves into a single rate."

Ms. Wells expects that this new policy, effective with the October billing statements, will affect approximately 250,000 accounts.

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