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Attack of the Killer Fees

Are there fang marks on your wallet? It might be your banker taking a late-night nibble.

Lenders have created a clever concoction of fees -- slapping up to a punishing 41% interest rate depending on what dastardly deed you've committed. The brew steeping in their cauldron is frightfully potent: Last year it allowed them to extract more than $40 billion from customers; income from penalty fees accounted for more than one-quarter of profits. It's enough to drain the blood from your entire body.

If you haven't gotten socked with a late payment fee in a while, please have a seat. A decade ago credit card customers paid on average $20 when they missed the payment deadline. Today, you'll pony up more than double that (up to $45) for a single foible.

To avoid a steep late penalty, you'll have to pay a visit to the dark side. Most big credit card companies offer same-day online bill payment, gushing that it's the latest convenience for today's busy households. "No stamps! No envelopes!" they claim. No thanks, say Fools. If you have to pay your bill the same day, prepare to cough up $15 or more. Writing the due date on your calendar is a much cheaper way to go.

The easiest way to avoid rattling the cage is to pay your bills on time. Punctuality is an innocent cardholder's best defense. It's like a bucket of water to a witch -- it withers a lender's penalty-wielding power.

Maybe tardiness isn't your problem. (Just 3% of credit card accounts are past due by 30 days or more each month.) Over-limit fees, activation fees, annual fees -- have any of these crept onto your bill? How about convenience checks, balance transfers, credit insurance, and ID theft protection? Or maybe you've received a prepaid gift card only to find the gift dollars gobbled up by gremlins such as account inactivity fees, a monthly maintenance fee, or even charges to check your account balance. It's best to double-check the locks at night and read the fine print on your cardmember agreement by candlelight.

It's not just fees that will frighten your socks off. Any missteps, and your lender will attach a ball and chain to your low interest rate and throw away the key. The majority of credit card issuers hike interest rates when a customer is late with a payment. However, been lazy about paying someone else on time? Prepare for your punishment. Lenders can legally raise your interest rate based on your payment record with some other creditor.

Mwa ha hahaaaa....

Those few dollars in late fees and extra points on your APR may not seem like much, but they can sure take a bite out of your borrowing power if you're a frequent offender. Many service providers are quick to send collection agencies after deadbeat bill payers. And a collection action can mar your credit reportfor a very long time.

If you aren't a frequent offender, ask the man behind the 1-800 customer service curtain to forgive a one-time gaffe, such as a late payment. To protect yourself from all other bloody inconveniences, remember: The devil is in the (cardmember agreement) details.

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