Protect Yourself Against Credit Card Fees

Credit cards as seen in Orlando, Fla. on July 1, 2021. (John Raoux/AP Photo)

By Lisa Gerstner From Kiplinger’s Personal Finance

Failing to pay your credit card bill on time can result in a hefty fee. The amount varies by card, but under federal rules, issuers can currently charge up to $30 for the first late payment and up to $41 for subsequent late payments within six months.

The maximum fee is subject to an annual adjustment for inflation, which reached 40-year highs in 2022. Americans rack up about $12 billion each year in credit card late fees, according to the Consumer Financial Protection Bureau (CFPB).

Recently, the CFPB proposed capping credit card late fees at $8, estimating that large card issuers generate about five times more in income from late fees than the collection costs they incur for late-payment violations. The CFPB also wants to limit late fees to no more than 25 percent of the minimum payment that the cardholder owes and eliminate the automatic inflation adjustment. The CFPB is gathering public comments on its proposals and has not issued a final rule.

Of course, fees aren’t the only potential negative outcome of missing a credit card payment. If you pay your bill 30 days late or more, the issuer will likely report it to the major credit reporting companies—Equifax, Experian, and TransUnion. Payment history has more impact on your credit score than any other factor, and skipping payments could cause your score to sink significantly, especially if you previously had a clean record. Paying late can also trigger a penalty annual percentage rate, which replaces your card’s standard annual percentage rate (APR) and may run as high as 29.99 percent.

If you slip up and miss a payment, ask the issuer whether it will cut you a break, especially if it’s your first offense. Nearly 90 percent of people who have attempted to get a credit card late fee waived were successful, according to a study from personal finance site WalletHub.

Setting up automatic payments of your credit card bill from your bank account can help you avoid missing payments. With most issuers, you can also sign up to receive automatic reminders of upcoming due dates by text message, email, or mobile app notification.

©2023 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.

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