Dealing with Late Payment Credit Card Fees

Credit card penalties are one of the many reasons why American cardholders are continuously accumulating debt. Perhaps the most common credit card penalty is the late fee, which most people have had the misfortune of receiving. Understanding late fees is a crucial part of properly managing credit card balances.

Understanding the Late Fee

Credit cards are simply a device used to create ongoing loans through purchases. Just as with any other loan, interest is charged so that the lender (the card issuer) has an incentive to grant the loan. If the loan is not paid on time, interest begins to accumulate and a late fee is charged to motivate the cardholder to pay their debts on time. Every credit card comes with different terms that are outlined in the fine print of the application, so it is very important to read and understand these stipulations before using the card. Sometimes the terms may be confusing to the average consumer, so don’t be afraid to ask the card company questions about late fees and how they are are charged.

The Late Fee Process

Each card issuer charges penalties differently, however fees usually appear on the card statement  shortly after a payment deadline is missed. Most credit card companies charge a predefined fee regardless of the cardholder’s current balance, and in many cases additional fees will be charged as well. Credit card companies have a tremendous amount of freedom when it comes to how much can be charged for late fees and when the fee can be applies, which is another reason why it is important to understand the terms of each card application before applying. If the late fee is not paid within a set period of time additional fees will begin to accumulate.

Avoiding Late Fees

The easiest way to avoid late fees is to make payments well ahead of the due date every month. Many people make the mistake of trying to pay their balance on or just before their due date. This is not recommended because the card company issues late payments based on the payments that have already posted to the account. It could take days for a payment to post, in which time a late fee could be charged. Therefore it does not matter when the payment is made, but rather when it is posted to the account by the credit card company. It is advisable to send in payment at least a week before the due date, in order to give the card company time to post the correct balance.

After receiving a late fee there is little that can be done, aside from simply paying the late fee. Keeping track of expenses and due dates is the only way to prevent debt from accumulating due to late fees. In some cases the card company will retract the late fee upon request from a longstanding customer, however there must be a good reason why the late fee occurred in the first place, and this usually only happens under rare circumstances.