Consumer Watchdog Agency Proposes Rule to Limit Credit Card Late Fees

Talk about good news.

There are plenty of benefits to using a credit card. For one thing, making purchases on a credit card often means getting to enjoy cash back or other rewards. Plus, you might get more purchase protection than you'd get using a debit card or cash.

But while credit cards can benefit consumers financially and also help them build credit, they have their drawbacks. If you can't pay off your credit card balance in full, for example, you might accrue a lot of interest on it, making your purchases cost more.

Also, being late with a credit card payment could result in costly fees that hurt you financially. One consumer watchdog agency, however, is now taking steps to limit those fees so they aren't such an undue burden.

Cracking down on credit card late fees

The Consumer Financial Protection Bureau (CFPB) says that credit card late fees cost U.S. consumers about $12 billion a year. As such, the agency just proposed a rule to curb those excessive fees. And if that rule goes through, it could save consumers as much as $9 billion a year in reduced late fees.

The problem with late fees is that they can apply even if you're just a few hours late with a given payment -- something that could easily happen to the best of us. It's common for credit card companies to charge as much as $41 for a single late payment, but under the CFPB's new proposal, that number could shrink down to just $8.

How to avoid credit card late fees

One of the easiest ways to avoid getting hit with credit card late fees is to mark your calendar with your various cards' due dates and make sure to set up reminders. That could help you avoid being charged due to human error.

Another good bet? Keep tabs on your credit card balances by checking them weekly. And if you see you're spending too much in a given month, cut back. That could help you avoid being charged a late fee due to an inability to pay.

You should also know that in some cases, your credit card company might let you off the hook for a late fee. It pays to ask for that leeway if you happen to miss a payment.

Now, you're unlikely to see that fee waived if you're chronically late. But let's say you've been a cardholder for three years and are a day late with a payment because you simply forgot to send it in. In that case, it's worth calling your credit card company and asking for a little flexibility. In many cases, a card issuer will waive the fee for a first-time offense, especially if you've been a cardholder in good standing for years.

But in general, avoiding credit card late fees altogether is really your best bet. This holds true whether the CFPB's new proposal goes through or not. Even if credit card late fees are minimized in the future, at the end of the day, you're still being charged for something you're not getting value out of. And that's not something you want.