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How to Avoid Credit Card Late Fees

Older Couple Examining Bill

Having a line of credit in the form of a credit card offers convenience and security. You can make purchases now and repay the balance later. And if you make a purchase and the item is defective or arrives in a condition other than how it was advertised, the credit card company can investigate the charge and possibly obtain a refund on your behalf.

However, with a credit card comes certain responsibilities on the part of the cardholder, and if that person is not diligent in paying what they owe on their card every month on time, they could end up credit card late fees.

What Are Credit Card Late Fees?

Credit card late fees are penalty fees charged by credit card companies for nonpayment of a balance owed on a line of credit at the end of the monthly billing cycle. These fees are intended to motivate cardholders to pay their minimum balance due by the agreed-upon due date.

Average Credit Card Late Fee

Prior to 2010, credit card late fees varied considerably depending on numerous factors, including credit card company policy, the age of the credit card account, and the number of missed payments. On average, a cardholder could expect to pay anywhere from $15 to $40, with some credit card companies charging well above this range.

Credit CARD Act

However, in 2010 a federal law called the Credit CARD Act placed strict limitations on the various penalty fees that credit card companies could charge consumers. According to the Credit CARD Act, credit card companies can only charge an initial penalty of $25 for a single missed credit card payment. A company can charge additional fees if it can prove that the cardholder’s delinquent payment caused expenses in excess of the amount set by the federal government. If additional payments are not made, the company can charge additional fees of $35 per incidence.

Preventing Late Fees

The most effective way to avoid credit card late fees is to set up automatic payments through the credit card company. Most major credit card companies offer this service free of charge, as do almost all major banks. Another tip is to schedule all your credit card payments on or around your payday. This ensures that you have sufficient income to cover the minimum balance and takes the guesswork out of making your payments.

Involve the Credit Card Company

If a temporary financial crisis stops you from making your next credit card payment, contact your credit card company immediately. Ask to speak to an account specialist or manager – typically, only a manager can offer or approve a one-time courtesy payment extension. Provide a clear account of your financial circumstances and explain why you cannot make your payment. Ask the manager to grant you an extension and waive any nonpayment or over-the-limit fees for that billing period. You must contact your credit card company before your due date or a manager may be unable to approve your request.

Improve Your Credit Score

Paying your credit card bill on time shows new and existing creditors that you are financially responsible and capable of dealing with due dates. Missing a credit card payment even just one time can cause your credit score to drop by several points, so mark your calendar and pay every month when you’re supposed to, and consequently help your credit rating.