A late fee is a special amount a card issuer may charge if a cardholder fails to repay the monthly amount they agreed on. Late fees can threaten a borrower’s credit score and cause them to qualify for a higher interest rate.
Users who have failed to make card payments in time normally see the charges in the next billing statement.
For an experienced user, late fees are no surprise. As a rule, the late credit card payment penalty is mentioned in the credit card agreement. This makes a good reason to read all conditions before signing such papers and starting to use your card.
This article dwells on the credit card late fee concept, what makes it up, what it can lead to, and how to avoid the late fee.
Best Credit Card Late Fees
What Are Credit Card Late Fees?
Every credit card requires users to repay the amounts spent. In most cases, cardholders perform monthly payments to ‘keep the balance’ and return what they owe. However, if this payment is not made by the due date of the credit card bill, users are obliged to pay the fee.
This late fee can vary from credit provider to provider, with some of them charging fixed amounts, others levying a percentage of the current bill (depending on which turns out to be a bigger sum), and a tiny part taking no allegations.
For example, the Citi Simplicity® card doesn’t charge you a late fee at all. The provider allows you to avoid a late fee in any case.
As stated, the card issuer will inform you of the fee and add it to the next billing statement, raising your minimum payment due.
Understanding Credit Card Late Fees
While the idea of late fee can sound simple and fair theoretically, it can create a never-ending chain of problems. You may not know that having been late on payment once, you will face an issue when a borrower increases the amount to pay the next time.
If this sum appears too big of a burden the next month too, they end up paying over the odds, which, in the end, is a gigantic sum of money.
In addition, late fees can have different levels. Sometimes, the fee would be tiered.
How Late Fees Work
So, when exactly is it late? Let’s imagine a case when the payment date is the 29th of the month. On this day, the company expects at least the required minimum payment. This is seen as the day when the money should be present on the balance, not just sent.
Many users make this kind of mistake, forgetting that the creditor only sees the day of receiving funds as the payment date. Thus, the payment considered late can make you 1 day late. However, the fee tends to be smaller the first time you’re late.
Most of the time, the difference between the first late payment and the next one ranges from $8 to $15. It goes without saying, you’re charged a late fee only once in a single 30 days’ billing cycle (once a month). If one is late a second time within 60 days, the fee grows.
Another key point in how the late fee functions is its dependency on how long the due amount hasn’t been paid. In case you skip several billing cycles in a sequence, the penalties grow.
How much exactly is added up is decided by the credit company. Other results that failing to pay on time can bring are described below.
Where to Find Your Credit Card Late Fees
As a rule, those using online banking tools will see a bigger minimum pay. The increased payment due will show up on your billing statement in the tab containing the word ‘warning.’
Reflecting any penalties that a user may be accumulating in this field is the responsibility of the card issuer.
In a broader sense, one should read the credit agreement thoroughly to understand inside out what types of fees may apply and when.
Credit Card Late Fee Examples
Apart from good advice and bare facts, it is always great to have illustrations of what it looks like to be charged a late fee and how to deal with it.
This part of the article reveals the mechanisms of action in a few of the typical situations where late fee applies.
This means that the amount of the fee will depend entirely on the card terms. Tiered fees are normally inferred from the user’s total balance. This scheme implies that the higher the amount, the more serious the fee will get.
E.g., borrowers with $1,400 might be charged just $15, whereas those who keep over $2,000 will have to pay a higher late fee: up to $30.
How Credit Card Fees Compound
The late fee has a notorious tendency to accumulate. If a user is late with credit payments more than once and makes another late payment every time, the late payment fee grows.
To illustrate, if you have a credit card balance of $600 and make a late payment within the first billing cycle, the late fee will be $20. The overall sum to repay would also include the APR that supposedly is 15%.
This results in you owing over $700. During the second cycle, i.e. if you’re 60 days late, the fee doubles as $40 and remains such for every consecutive cycle.
Excessive late fees, a stricter interest rate, and the icing on the cake – the penalty APR, – awaits non-payers if they ignore their repayment responsibilities for 3 months in a row. Penalty APRs can hike up to 15%.
Facing A Credit Score Hit
Next, one of the consequences of late payment might be a FICO score drop. A collapse of credit scores can happen simply because the credit card issuer reports your activity to all major credit bureaus, though reporting to two of them would also be enough.
For reference, when a payment is 30 days late, this silence from your side can cost nearly 85 points of score. The card issuer then is mailing your payment to the credit bureau.
A single cycle can stain your credit record for 5 to 7 years since banking institutions are obliged to report such incidents.
At the same time, a tiny delay like 1 or 2 days would not come close to the impact of a late payment, around 30 for a first late payment or at least 60 days late. A few hours and days of overdue might not be reported by the card company, and, what is more, a user may be pardoned completely.
Suffering From Penalties
A decent APR is a huge struggle. This knows everyone who has spent some time looking for a credit card with moderate interest. Now, imagine that paying your credit card bill after the due date ruins the hard-to-find good APR, turning it into the opposite. Alternatively, those who enjoy a period of 0% intro APR lose out on this benefit.
It’s a fact that if you miss a credit card payment, it can not only bring damage to your credit score but make it a challenge to repay the debt. In the end, this questions whether taking out a credit was worth it. So, try to utilize all means to pay on time and give the card company zero reasons to incur a late fee.
How to Get Credit Card Late Fees Waived
Since missed payments are a big issue in the US and many credit card holders are likely to fail to meet due dates, credit companies have devised a way to be flexible with assigning fees. They differentiate between various circumstances and let clients have late fees removed.
Below, see a short guide on how to waive the late fee if you make a delayed payment.
1. Immediately pay your bill
A credit card late payment goes hard on your score if it’s long past the due date. Since late payment can cause a drastic dwindle in points, try to repay the minimum payment as soon as possible for your side. Quick reaction is, without exaggeration redeeming for such cases!
This action can prevent the accumulation of interest charges and save your credit from further damage. But the pluses of paying off early don’t stop here. The issuer is sure to be more willing to continue cooperation with a client who doesn’t need ten reminders and can take over the situation quickly.
2. Check to see if you’ve received a late fee
Now, when your conscience is clear, and after you miss a payment, you compensate for it, you will want to check if you’re officially charged a late fee. Look into your credit statement to verify this information and see additionally if you were punished with any APR.
Credit statements will also demonstrate all the changes in your status, including the presence of credit card rewards, points, or access to exclusive features.
3. Contact your credit card issuer
Next, you need to check if it’s possible to waive the credit card late fee in your specific case. It’s nice if you do it by getting in touch with customer support and explaining, for instance, that it was an atypical situation. Stay respectful, and remember they will decide based on your credit profile and good credit history.
Don’t be too shy to mention any hardships you might be going through, like an illness, divorce, or problems with employment. The creditor will put away any fee if this is an unintentional delay.
Once again, we want to highlight that waiving is rather a one-of-a-kind chance or an exception from the rules. Creditors aren’t as forgiving to do it all the time.
Read Also: Credit Card Annual Fee Explained
Ways to avoid credit card late fees
Now, we all have our routines and can be prone to miss deadlines. When it comes to cases when a payment is late or missed, realizing your absent-mindedness can be especially painful. Still, you’re not completely lost. Luckily, there are tips and tricks for preventing delayed card payments and clearing out credit karma.
P.S. If you’re in search of a surefire way to be charged nothing for late payment, find an issuer that doesn’t charge late fees at all. Here belong such popular cards as Petal® Cashback No Fees Visa, several cards by Discover It® with no fee for the first delay, Citi Simplicity® No Late Fees Ever, and Apple Card with fees removed completely.
Here is a list of helpful ways.
- Create a payment schedule.
Automating payments through online banking or performing them manually according to the made-up schedule is one of the best tricks to overcome credit amnesia and bring consistent minimum amounts in full size. Smartphone reminders will also help you meet the credit card bill late if not muted.
- Mind the time of the day.
The knowledge of when exactly you run out of time to pay the monthly credit off is another key. This is a saving vest for paying off at the last minute, for example, if you neglect point 1 and don’t arrange automatic payments.
By keeping in mind the part of the day that trims you from timely settlements, you can use this info on your behalf.
Normally, a company can’t call for a payment before 5 p.m., even though your card company might have a different cutoff time. Anyway, this means that sending money up to 5 p.m would still be fine if you know that processing doesn’t take a lot of time.
Furthermore, some merciful providers allow due payments even up to midnight. This way or another, this is a must-check point at signing the agreement.
- Have a ‘Plan B’.
Just in case your main means of payment fall out, what will you do? For such emergency cases, have another way: pay online, via phone, or choose another convenient method you’ve already tested.
Beyond Fees: The Consequences of Missing Payments
Now, when you have looked into your card’s credit card agreement, it’s vital to expand the awareness of what outcomes follow non-payment and how it can show up on your credit.
It is essentially not just about an additional sum to pay for being behind schedule. Oftentimes, the consequences of late payments include the loss of the perks and benefits you’ve been receiving from the issuer and spoiling any chances to qualify for other loans, such as auto loans and mortgages, or open new credit cards.
Let’s get into these points one by one.
You May Lose Your Rewards
Credit card rewards aren’t earned easily, but they can be taken away if you pay late at least once. Forfeiting the benefits you were once entitled to is often more expensive than an extra $20 at a time. A card issuer may close the feature of redeeming rewards or points for traveling for users whose credit card account.
Your Credit Score May Take A Hit
What is worse for some users, a missed payment has the power to lower credit score. Being 180 days late, equal to skipping payments within the next six cycles, can lead to the account falling under a total charge off or collection procedure. Companies then write such accounts as a loss, and the credit event stays in the credit report even for 7 years.
You May Receive A Penalty APR
Who wants penalty fees paired up with a spiraling APR? This is clearly another downside, along with fees that users can suffer from.
Still, your credit company can’t lawfully raise the APR until you are late on a payment minimum 60 days. This is linked to two consecutive billing cycles. In addition, the Credit Card Act established in 2009 has canceled universal default.
This means that credit card companies can no longer raise users’ APR in cases when they haven’t been in time for payments to other creditors.
This also implies that a credit event can be removed from one’s profile. Still, this act doesn’t mean one can skip the increased interest rate with ease. The law also says that if a user has other credit card balances with the same card company, a penalty may apply there, even though those payments were made on time.
Qualifying for a Fee Waiver
The survey found that nearly 82% of cardholders who applied for fee wavering in the US got it waived. Besides, some cards have policies that automatically forgive all first overdue. The key here is to ask for it without hesitation. Hence, the statistical data is based on your credit report, including your payment history.
Still, certain groups of people qualify for a fee waiver ahead of others. Here belong:
- Parents whose children are under 18
- Those who have non-payment as a one-off event
- Users who accidentally paid past the fixed date
- Bottom line: You don’t have to just accept a credit card late fee
As our final point, we want to say that the devil is not as black as he is painted. Of course, you need to clear your dues as soon as possible and strive to have an exemplary credit profile, with all payments made by the due date.
But there is good news to those who don’t feel the credit card market is fair with its versatile penalties and traps.
In 2023, the Consumer Financial Protection Bureau (CFPB) shared its proposal concerning lowering the overall card fee. The document suggested the new amount – $8, as opposed to the current average $41.
In a nutshell, capping the fee is proposed with the goal to save customer’s dollars and ensure the credit market can be competitive. As CFPB director Rohit Chopra says, it will keep banks from ‘charging illegal junk fees.’
Though receiving criticism, the law is supposed to ensure the credit card market is just and predatory practices aren’t thriving. Earlier, in 2009, The Credit Card Accountability Responsibility and Disclosure Act (CARD) was passed.
The Credit Card Accountability Responsibility Act protects customers’ cards and limits excessive credit card late fees and APR. For instance, lenders should notify in advance about applying the penalty APR.
Sources Used in Research for the Article:
- CFPB Proposes Rule to Rein in Excessive Credit Card Late Fees, Consumer Financial Protection Bureau, https://www.consumerfinance.gov/about-us/newsroom/cfpb-proposes-rule-to-rein-in-excessive-credit-card-late-fees/
- What is a credit score, Consumer Financial Protection Bureau, https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-score-en-315/
- Credit Scores, Federal Trade Commission, https://consumer.ftc.gov/articles/credit-scores