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7 tips to avoid a credit card late fee

Nearly all issuers charge them, but you don't have to fall victim

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If you're even a minute late with a payment, your credit card company can hit you hard in the wallet -- as much as $39 each time, according to a July 2008 survey. However, some simple steps can help keep your exposure to these extra costs to a minimum.7 tips to avoid late fees

Consumer Action's 2008 Credit Card Survey says 95 percent of credit cards tack on a late fee, the average being around $26. These fees aren't new for credit cards -- or for any other kind of bill, for that matter. They are, to card issuers, an incentive to get customers to pay on time. But some consumer advocates complain that the high fees, complicated fee structures and stringent on-time requirements set cardholders up for failure and let credit card companies reap the benefits.

"Late fees have become a profit center and not merely a way of discouraging late payments," says Lauren K. Saunders, managing attorney with the National Consumer Law Center in Washington, D.C.

The late fee maze
To find out exactly how much you'll be charged for a past due payment, you'll have to carefully read the fine print of your cardholder agreement. These days, most credit card issuers base their late fees on a tiered system. (See chart below.) In other words, the precise amount of the fee is determined by your total credit card balance.

For instance, under Discover's two-tier late fee system, late-paying cardholders are charged:

  • $19 if they owe $250 or less.
  • The maximum fee of $39 if they owe more than $250.

Meanwhile, Capital One has a more byzantine three-tier late fee system, under which cardholders will be charged:

  • $15 if they owe $99.99 or less.
  • $29 if they owe between $100 and $249.99.
  • The maximum fee of $39 if they owe $250 or more.

Making matters stickier is that the definition of "on-time payment" is to-the-millisecond-specific for most card issuers. Among top card issuers, only Capital One offers a three-day leniency period. At other banks, the cut off could be midnight or 5 p.m. Eastern on the due date, for example. That means that even if you put your check in the mail five days before the payment is due, if it hasn't arrived and been processed by the cutoff moment, you'll be charged for the delay. That often holds true even if the due date falls on a weekend or a holiday.

The domino effect

If you're organized, why worry? "It's not just a terrible deadbeat person who gets hit with a fee, it's all of us," says Consumer Action spokeswoman Linda Sherry. "With hair-trigger late fee policies, most of us will get caught in it once in a while."

Even if you can handle the fee itself, you may not like the other consequences. For starters, a number of card issuers will raise your card's interest rate after one or two belated payments -- an easy way to say goodbye to the low rate you scored on a balance transfer offer and trigger the card's default APR, which averages 26.87 percent. "It's as if someone were proposing that in response to the foreclosure crisis, we should increase people's mortgage rates," says Saunders with the National Consumer Law Center.

While a late payment appears on your credit report only if it's 30 days past due, when you're slow to pay up, your credit card company might see you as high risk. "If they think I'm having problems, even if they like to receive those late fees, they'll likely decrease my available credit," says Patrick Ritchie, author of "The Credit Road Map."

Because your credit score is directly correlated to the ratio between the balance you carry and your available credit -- that is, how much is left for you to use versus how much you've actually used -- a lower credit card limit could end up dinging your credit score.

Helpful tips for avoiding late fees
Here are seven ways to help you avoid credit card late fees:

  1. Plan ahead: A few card issuers, including Chase and HSBC, charge extra fees for online payments that you need to post the same day, so even if you pay electronically, do it three to four days ahead so your credit card company will process the payment by the due date. If you're snail-mailing checks, allow even more time -- about 10 days -- to allow for mail snafus. And unless you're desperate, forget about phone payments -- a number of banks charge a fee for them, no matter when you call.
  2. Change your payment due date: A few card issuers allow you to choose a due date to coincide with your payday schedule, so a cash shortfall won't make you late. You can even choose a due date that's easier to remember. Your birthday's on Feb. 17? Make your credit card payment due on the 17th of each month.
  3. Schedule an automatic payment: Some banks offer an autopay program that links your credit card to a checking or savings account; you decide whether to automatically pay the new balance, the current minimum payment or a fixed dollar amount. If you bank online, you can also arrange a do-it-yourself autopay. Just estimate your usual monthly minimum, schedule a monthly payment date and have the amount deducted from your account automatically. Just make sure you have enough in checking to cover it or the overdraft fees will eat up your savings on late fees.
  4. Remind yourself: Some credit card companies, including Chase, will alert you of upcoming due dates by e-mail or voice mail. You can also schedule a monthly e-mail reminder through a website, such as MemoToMe.com or RemembertheMilk.com.
  5. Switch cards: "Many consumers are totally tied to interest rate" when they choose a card, says Linda Sherry, spokeswoman for Consumer Action in Washington, D.C., a national nonprofit consumer education and advocacy organization. "But one late payment will increase your finance charge by a whopping amount." Instead, check out your card's late fee policy or opt for one of the few no-fee cards available, such as American Express Clear, which Sherry says "was designed to be an antidote to all the anti-consumer practices in the credit card industry." Its interest rate is only average, but for consumers prone to procrastination, a no-fee card could be a saving grace.
  6. Keep a low balance: On cards with tiered fee systems, a lower balance means a smaller late fee. With a Bank of America Visa card, your late fee will be $24 cheaper if your balance is less than $100.
  7. Get out of it: Even conscientious consumers will probably get hit with a late fee at some point. However, if you have a good record of on-time payments, call and politely ask a customer service representative to waive the charge. No dice? Ask to talk to a supervisor, or try again on a different day. You might even threaten to close your accounts with the company -- a tactic that worked for Jeff Roth of Molalla, Ore., after his wife's Chase credit card was hit with a $39 late fee when the Fourth of July delayed processing of a payment. "My advice to those who feel they have unjustly been assessed late fees is to be assertive about getting the charges removed," says Roth, who posted about his plight at GetRichSlowly.org. "It won't always work, but most credit card companies will at least give you one freebie." Next time, though, you may be on your own.

Below is a sampling of various types of cards from some of the nation's largest credit card issuers, along with the late fee policies associated with those cards. To find out what your credit card issuer late fee policies are, call the customer service number on the back of your credit card.

Card Late fee system Minimum and maximum fees Other penalties
American Express Clear None None Interest rate raised after two late payments within 12 months
American Express Blue Two tiers: $399.99 and under; $400 and higher $19, $38 Interest rate raised with one late payment
Bank of America NFL Extra Points Platinum Plus Visa Three tiers: $100 and under; $100.01 to $250; $250.01 and higher $15, $39 Interest rate raised with two late payments within 12 months 
Capital One Standard Platinum MasterCard For Students Three tiers: $99.99 and under; $100 to $249.99; $250 and higher $15, $39 Interest rate raised with two or more late payments within 12 months
Chase Platinum Visa Three tiers: $99.99 and under; $100 to $249.99; $250 and higher
$15, $39 Interest rate raised with one late payment
Citi Diamond Preferred MasterCard Three tiers: $100 and under; $100 to $250; $250 and higher
$15, $39 Interest rate raised with one late payment
Discover Open Road Card Two tiers: $250 and under; $250.01 and higher $19, $39 Interest rate raised with two or more late payments within 12 months
HSBC Platinum MasterCard with Cash or Fly Rewards Three tiers: $100 and under; $100.01 to $1,000;  $1,000.01 and higher
$15, $39 Interest rate raised with one late payment
US Bank WorldPerks Visa Two tiers: $500 and under; $500.01 and higher
$24, $39 Interest rate raised with one late payment
Wells Fargo Secured Visa Three tiers: $249.99 and under; $250 to $499.99; $500 and over
$20, $39 Interest rate raised with two consecutive late payments

See related: 5 sneaky card tricks and how to beat the bank, How to read credit card fine print, Timing is everything for some credit card payments, Credit card statistics, Glossary of common credit card terms, 12 tips for automatic bill paying

Published: December 15, 2008


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