how to avoid late fees and other penalties
you can often avoid late fees by arranging for your bills to be paid automatically from your bank account this depends of course on you having enough money in the account to cover the payment it s always a good idea to pay a credit card on time and in full each month to avoid interest charges but if you can t pay off the full balance making at least the minimum monthly payment on time will help you avoid a late fee in some cases late payments can also trigger other charges for example if your checking account does not have enough money to cover a credit card payment you can also incur a returned payment fee from the credit card issuer as well as a non sufficient funds nsf fee from the bank lenders may also review and raise interest rates based on payment history this is referred to as penalty repricing when that happens the lender will raise your interest rate to the penalty annual percentage rate apr described in the credit agreement which may be considerably higher late fees are just one of several types of fees banks and other companies charge consumers for instance credit card users can also be subject to annual fees balance transfer fees foreign transaction fees and returned payment fees these fees can be avoidable if you choose your credit card carefully because not all cards impose every fee you can also avoid fees by following the contract terms cracking down on junk feesthe consumer financial protection bureau cfpb announced in march 2024 that it would cap credit card late fees at 8 down from a typical fee of 32 it estimates this will lead to average savings of 220 a year for 45 million consumers who now pay late fees 2however the rule is opposed by banks and the u s chamber of commerce filed a lawsuit and a request for a preliminary injunction to keep it from taking effect it says the rule will cause financial institutions to pass along costs to consumers who have never paid late 3the cfpb has estimated that excessive credit card late fees total 12 billion each year 4under the credit card accountability responsibility and disclosure act of 2009 or the card act late fees must be reasonable and proportional to the costs that credit card issuers incur as a result of late payments but in february 2023 the cfpb report noted that late fees currently range as high as 41 and generate income that is about five times greater than the collection costs 5the cfpb has also reported on junk fees related to other types of borrowing some auto lenders it said illegally charged late fees that are more than what s stated in their loan agreements for example an auto loan servicer might assess a 25 late fee when the terms cap late fees at no more than 5 of the monthly payment amount even if the 25 late fee exceeds that 5 6in the case of mortgages the cfpb has reported that some servicers also charged late fees in excess of the amount spelled out in the mortgage terms the lenders even charged late fees after explicitly saying they would not 7student loan servicers had a different issue according to the cfpb their customer service representatives would sometimes accept a loan payment by credit card over the phone then reverse the payment after learning that the servicer did not accept credit card payments at that point the borrower would incur a late fee 8if you re charged a late fee check your contract to make sure it isn t higher than it should be frequently asked questions faqs 