Sneaky Credit Card Trick #3 - Late Fees In Minutes

[This post is written and copyrighted by FIRE Finance (]

Sneaky Credit Card Trick #3 - Late Fees In Minutes Most credit companies charge high late fees to the tune of $35 to $39 per late payment. So a smart credit card user has to be careful to avoid this trap.

What is sneaky about this fee?

The sneaky thing about this fee is that even if we're late by one minute it would still cost us $35 to $39. So its simply not enough to know the due date alone. We must know the time by which our payment is due. If the payment is due on the 30th of a month by 11:59 pm, our payment will be considered lated if it posts at midnight on 30th of the month!

Way(s) out?

The basic philosophy is to know what time and date our payment is due and send it in early. A safe practice for the tech savvy is to enroll in online statements so that we don't have to wait for the card statement via snail mail. This practice would buy us time and helps to plan our payment.

There are several approaches to avoid a late fee:
  • Pay the minimum immediately: If we are short on cash we can immediately pay the minimum amount due to avoid late fees. Later when we have more money we can pay off the bigger amount.
  • Automatic online payments: Most credit card companies offer the facility of paying our cards online. We can choose an online payment:
    • amount that automatically covers the minimum amount due on a credit card each month
    • date well in advance of our credit card due date.

    Whenever possible we could save some interest dollars if we pay off the bill in full at the earliest opportunity.
  • Pay by Phone: Some of us receive statements by snail mail. And a few pay using checks through snail mail too. In these cases, for whatever reasons, if our bill is delayed or our payment would not make it by the due date and time, we can pay by phone. Most card companies charge a fee of $5 to $15 (find out exact amount when you call) when we pay by phone. That's way less than a $35-$39 late fee. We should be prepared with our bank's routing number, and details of our account when we pay by phone.
  • Adjust our Due Date: Its a worthwhile strategy to move our due dates to sometime near our pay check days. These days most card companies allow us to set our due dates. This practice is useful since we have cash in our accounts when the credit card statement arrives. On the other hand if we have a due date when our pay checks are nearly exhausted, we might end up paying only the minimum amount and thus incur interest on the balance.
  • Call and Request a Fee Waiver: Sometimes due to unforeseen circumstances we might end up being late on our due payment. If we've been responsible credit card users who usually pay off balances in full every month, then we can call the card company and request them to waive off the late fee. From experience we've seen that in most cases, reputed credit card companies oblige and waive off the late fees.

    However, if we are carrying a balance on our card and have requested a late fee waiver, we should specifically ask our lender not to increase our APR since we've been late on a payment. Here is a quote from a case study:
    For the past several years, my credit card payment was automatically sent out the first of each month through my online bill paying service at my bank. I enjoyed the lowest rate, 4.75 percent, all that time.

    This past August the payment did not clear my bank until the 20th of the month even though it went out at the regularly scheduled day of Aug. 1. I discovered this when I was charged a late fee on my credit card bill. It turns out that there was a new address for payments and since I use the online bill pay, I didn't notice it. So, it went to the old address. And, it was not processed timely.

    I changed the address in my banking system and the credit card company even agreed to waive the $29 late fee since it was a processing error. However, the next month, they increased my interest rate to 19.99 percent because I had made a late payment!

    After arguing with the company, the best they could do for me was to reduce it to 9.99 percent -- still unacceptable. Imagine how many customers they do this to by changing their mailing address periodically. I am going to close my account and pay the balance with my line of credit. This is the thanks they show me after eight years of business.
Better Solution?

If you are feeling overwhelmed about the high late fee then there is another option. We can look for cards offered by local credit unions and community banks who charge way less late fees (to the tune of $10 - $15). Usually they are more lenient on the payments' timings and penalty fees. Check with them to find out a card's specific details and make sure that you've read the fine print carefully.


Image Source(s): iStockPhoto

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