Fees, interest charges still possible on closed credit card account
By Tanisha Warner
Tanisha Warner is the communications manager for Money Management International, where she manages educational content designed to teach consumers about personal finance topics. She writes "Credit Care," a weekly reader Q&A about debt issues, for CreditCards.com.
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Dear Credit Care,
Can credit card companies charge a late fee on an
account they closed? AND can they continue to charge interest on that same
account? -- Casey
closed accounts such as yours -- ones with a balance owed -- the terms of your
credit card agreement are still applicable. Only after a closed account is paid
in full is the agreement between the card issuer and the account owner
does that mean? Well, it means that if you make a late payment, the card issuer
may take whatever action is allowed within your card member agreement. A typical
late fee is $25. In addition, all other terms of the agreement, such as the
interest rate(s) that applies to your account balances are also still in
effect. You will be responsible for any interest accrued under your agreement
each month you carry a balance. Only once you have paid the balances in full
will your agreement with the card issuer end.
have had or are having trouble making at least the minimum monthly payment required
on this closed account, I recommend that you take action soon. The last thing
you want or need is to add to your existing balance on this account with late
fees. Paying off the account as quickly as possible would be ideal. You will
save money in additional interest payments as well as have the peace of mind
that comes with paying off a credit card account. Take a look at your monthly
expenses and determine how much you can realistically afford to pay each month
on the account. Then use CreditCards.com's payoff calculator and
incorporate the monthly amount to find out how quickly your debt will be paid
you be unable to consistently make even the minimum payment due each month on
the account, you could consider visiting with a certified counselor at a
nonprofit credit counseling agency. Check the websites for the Association of Independent Consumer Credit Counselors or National Foundation for Credit Counseling to find a nonprofit agency in your
area. Your counselor will review your monthly expenses and income with you and
help you determine the debt repayment option that best fits your financial
needs. It could be that you just need to cut back in some spending areas to
identify the funds needed to pay your monthly credit card balance. Or, you may
qualify for a debt management plan, in which your counselor will negotiate with
your card issuer on your behalf to lower your interest rate and perhaps your
if after reviewing your finances, you and your counselor determine that you
don't have enough income to make the minimum payment on the account, you will
have some decisions to make. You can look for ways to increase your income or
for more drastic ways to cut expenses, but don't ignore the situation. Your credit
will suffer and the creditor may take legal action that could result in a wage
or bank account
your credit with care!
See related: Survey: Minimum monthly payments haven't changed; we have, 6 tips to finding the right debt management plan for you
Tanisha Warner is the communications manager for Money Management International, the largest nonprofit, full-service credit counseling agency in the United States. She manages educational content designed to teach consumers about personal finance topics. You can find more money management advice on Blogging for Change and MMI's Facebook page.
Credit Care answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Credit Care.
Published: April 2, 2012