Credit Card Tricks of the Trade

Late Fees By The Minute

Anyone who has a credit card knows that the credit card companies aren't in business for charity purposes. Just like any other business, they want to make a profit. Unfortunately for consumers, charging fees-more and more fees, and extremely inflated fees-generates a large portion of card issuers' revenue. Let's take a closer look at late fees.

Late Fees

At one time or another, most credit card holders have been charged a late fee for sending in their payment late. When you get your next statement, you wince at the amount, perhaps admitting it was your fault. Late fees have grown up to $39, compared to $12 in the early 90's. Some lenders now have a tiered late fee system, so the amount of the fee is dependent upon your balance. The higher the balance, the higher the fee. Although it is ultimately the cardholder's fault for a late payment, the card issuers aren't totally innocent in all cases. Credit card companies have carefully researched and implemented ways to trip up their customers and, therefore, are able to levy more late fees. Here are several tricks some lenders resort to in order to assess more late fees:

1. Shorter grace periods have contributed to the growing ability of lenders to make more money from late fees. The grace period is the time you have to pay your bill before finance charges kick in. By reducing grace periods down to 20 days, in some instances, cardholders have less time to get their check in the mail from the time they receive the statement in the mail. I've had personal experience with this when the lender shortened my grace period, which changed my due date, and I didn't even realize it. For years, my payment was due on the 25th of each month and I didn't figure it out until I had been charged a late fee.

2. Another trick some lenders may try is changing their bill payment address, causing many payments to get held up in the mail, finally finding their way to the correct department, albeit, late.

3. If you mail in your payment close to the due date, but it still arrives on the day, you may think you've dodged a late payment fee. Don't be too sure! Some lenders require payments to be received by a specific time on the due date-say by 1:00 p.m. If you're five minutes late, or if the accounting department takes a long lunch, it's at your expense.

What you can do

The idea is to stay one step ahead of your lender! Mail your payment 7-10 days before the due date to ensure it arrives on time. Better yet, schedule automatic payments, but be sure to verify that the payment was received in case of a computer glitch. If it has only happened once, or even twice, most issuers will waive the fee if you take the time to call. Unfortunately, there's little that can be done for repeat offenders. Always check your statements for any changes regarding the due date and mailing address. Remember, late fees also give lenders an excuse to increase your interest rate at the same time so you can really get stung! Your best move is to pay your balance in full and on time.