Late Fees

Late fees are a classic example of “hidden fees”— ways the credit card issuers can extract just a little more money from consumers. Here’s how they work.

Late fees seem pretty straightforward. If your payment arrives late, the credit card company sticks you with a penalty, usually in the $15 to $50 range.

Some card issuers have found creative ways to increase revenues from late fees. They actually stipulate a time of day when the payment is due, such as 1 p.m. (You’ll find the time on your credit card bill, if your company plays this game.) So, if the letter carrier working the issuer’s route is running late that day and the mail arrives at 1:05 p.m.—or if the mail always arrives after 1 p.m. at that location—even if your payment arrives on the correct day, you’ll still get stuck with a late fee.

Also, some credit card issuers change their payment receipt addresses every couple of years. It doesn’t necessarily have to be a malicious move in order to generate more fees; but, if you mail your check to an old address, you can wind up owing late fees.

Even if you pay your bills on-line, it’s wise to check the payment address each month—just to make sure you know where mailed payments should go.

Another good reason to get your payments in on time is because multiple late fees in a specific time period (such as two late fees within six months) can trigger a credit card company to assess a penalty interest rate on some accounts. These interest rates can be exorbitant—as high as 23.99 percent—and they can last for the life of the credit card account.

What’s more, some credit card companies check your credit report after they’ve already issued you a card. In some instances, card issuers look on consumers’ credit reports for late payments to other accounts, then use that information as a reason to raise the interest rates on their credit cards.

Next: Over-Limit Fees