how late fees work
lenders like credit card companies and other creditors make money in a variety of ways including by charging consumers various fees like late fees late fees are levied when you don t pay a bill by a certain date for instance if you fail to make your monthly credit card payment at least the minimum by the due date the card company may impose a late fee that will show up on your next statement or a landlord may charge a late fee if you don t pay rent on time all late fees must be explicitly described in credit card agreements leases or other types of contracts creditors legally can t charge excessive late fees what constitutes a reasonable fee is a matter of debate in most cases late fees typically range between 25 and 50 some creditors provide a grace period before they impose the late fee for instance your rent may be due on the first of every month but the landlord might allow you to pay rent by the 10th without incurring a late fee a grace period must be clearly stated in the lease agreement some creditors waive the late fee the first time you miss the payment deadline while others do not charge any late fees at all still other lenders offer no leniency and charge a late fee even if you just miss the payment deadline by a matter of minutes or hours late fees can increase your outstanding account balance for example a late fee may be added to the next month s credit card statement not only does that raise the balance by the amount of the late fee but you would then have to pay interest on the late fee as well missing a payment due date can also have a negative impact on your credit history and credit score that s because payment history plays a major role in credit scoring models making up about 35 of your fico score for example 1 so the more payments you miss the more you will pay in late fees and you can also expect your credit score to take a hit as late fees add to your balance your credit can be further impacted another part of your credit score is your credit utilization ratio the more credit you use the lower your credit score 