by Maurie Backman | April 26, 2020
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The worst part? It's an easily avoidable scenario.
Though credit cards make life convenient, they come with their share of drawbacks. Not only do they make it easy to overspend or give in to impulse purchases, they also come with a host of potential fees that can cost you money needlessly.
One is the late payment fee, and it applies when you fail to make your minimum payment by the due date on your credit card's monthly statement. To be clear, you won't face a late payment fee if you pay your minimum on time, even if you carry the bulk of your balance over from month to month.
By law, your credit card issuer can charge you up to $25 for your first late payment, and then $35 for additional late payments within six months of your first one. Unfortunately, a growing number of Americans are paying their bills late, thereby subjecting themselves to extra fees. In fact, between 2016 and 2019, there was a 28% increase in payments 30 or more days late, and a 34% increase in payments 90 or more days late.
While being late with a credit card payment is never a good idea, sometimes mistakes happen. You might forget to pay your credit card bill even though you have the money to make at least your minimum, or you might misjudge your expenses so that when your bill comes due, you actually don't have the money on hand to cover that minimum. The good news is that you won't necessarily get hit with that late payment fee the first time it happens -- but only if you reach out to your credit card issuer and ask that it be waived.
Unfortunately though, 70% of credit card holders don't know that they have the right to request one late payment waiver from a credit card issuer each year, according to research by The Ascent. And that's a mistake that could prove costly.
You might think that a single $25 or $35 late payment penalty is no big deal, but if you're already struggling to keep up with your living expenses and have little money in savings, then actually, it's quite substantial. If you're late with a payment and you're charged that fee, reach out to your credit card issuer and ask to have it waived. If it's your first offense, you can, and should, point to the fact that you've always made your minimum payment on time, and that should do the trick.
Furthermore, if you're late with a payment but manage to get current on that bill very soon after, you should also ask to not have that late payment reported to the three major credit bureaus -- Experian, Equifax, and TransUnion. Once that late payment gets recorded on your credit record, your score could take a tumble, making it harder for you to borrow money affordably. Keep in mind that a payment that's 30 days late won't hurt your credit score as badly as a payment that's 90 days late -- but it still pays to do whatever you can to avoid having late payments show up on your credit history altogether.
The best way to prevent a scenario where you're late on a credit card payment? Set calendar reminders so you don't forget your bills. Another solution? Set up recurring payments on your credit cards. You can arrange to have your minimum payment deducted from a checking account so you won't have to worry about facing late fees.
Finally, keep tabs on your credit card balance each month so you're not late with your minimum payment due to a lack of money. Getting on a budget will help in this regard, too, as it will give you a better sense of what you can afford to spend.
As a consumer, you may have more flexibility with your credit cards than you think, whether it relates to fees, your interest rate, or your credit limit. It always pays to reach out and negotiate better terms with your credit card issuer. In many cases, you'll get what you want, especially if you're a cardholder in good standing.
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