If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience.
by Elizabeth Aldrich | Updated July 21, 2021 - First published on Dec. 10, 2019
Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
But there's more to the story.
Not paying your bills on time is one of the easiest ways to run up your credit card balance and damage your credit history. One slip-up won't be devastating, but fees and penalty interest charges can add up if it becomes a habit.
Luckily, most credit cards now allow you to set up automatic payments and avoid missing a due date. A recent report from the Consumer Financial Protection Bureau shows that new technologies are helping consumers to improve their credit card payment habits.
Although consumers are getting better at paying their bills in a timely manner, credit card issuers continue to rack up billions of dollars in late fees each year. So what's going on behind the scenes?
Tips and tricks from the experts delivered straight to your inbox that could help you save thousands of dollars. Sign up now for free access to our Personal Finance Boot Camp.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
Once your account has been properly set-up, automatic credit card payments make paying your bill convenient and easy. The automatic payment takes funds from a linked bank account on a recurring basis. That way you can pay off your credit card without making manual monthly payments. Usually, you can set it to make the minimum payment or to pay off your statement in full.
Over the past few years, there has been an uptick in credit card customers using automatic payments. The share of accounts enrolled in automatic payments increased from 11% in 2015 to 16% in 2018.
The increased use of this feature reflects an improvement in consumer habits. Automatic payments are a sure-fire way to avoid unnecessary late fee charges and increase your credit score by building up a history of on-time payments.
Even though more consumers are enrolled in automatic payments, total revenue from late fees continues to rise. Credit card issuers assessed roughly $13 billion in late fees in 2018 -- $3 billion more than 2015. But the proportion of missed payments has barely changed.
This boost is down to an increase in the number of credit card accounts, along with a higher charge for each incidence. The maximum fee credit card issuers are allowed to charge for late payments has increased by a few dollars since 2015. They can now charge $28 for the first missed payment and $39 for subsequent missed payments.
Still, it's clear that autopay hasn't resolved the issue of late payments. For some, it may simply be a matter of enrolling so they don't forget to make their monthly payments. For others, though, the problem is that they're coming up short each month. If you don't have the money to pay your credit card bill, enrolling in autopay doesn't make a difference.
Don't waste your hard-earned money on unnecessary late fees. Start by setting up automatic payments on each of your credit card accounts. Be sure to indicate whether your automatic payment will be the minimum, full balance, or other customized amount each month. You'll also need to keep an eye on your linked bank account balance to ensure you don't go overdrawn.
If you aren't ready to go the automatic payment route, consider making your minimum required payments as soon as you get paid each month -- even if your bill isn't due just yet. This approach guarantees that your bills get paid on time and eliminates the risk of you spending those funds on other purchases throughout the month.
You should build up an emergency fund regardless of how or when you plan to make your credit card payments. Your emergency fund can be used for more than just unexpected expenses. It can also act as a safety net for your credit card payment in case you run out of money before your due date. With an emergency fund stashed in a high interest savings account, you can tap into reserves to cover your credit card payment whenever necessary. Just remember to rebuild your emergency fund after you dip into it so you'll have access to funds if another unexpected expense comes up.
By making your credit card payment a priority, you'll save money and protect your credit score. The autopay feature offered by most credit card companies can help you to keep your bill-pay on track.
If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2022 The Ascent. All rights reserved.