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Credit cards have many benefits, but if you miss payments, the cost of late payments and interest can outweigh them.
Keep reading to find out what credit card late fees are, how they work, how much they cost, and most importantly, how to avoid them.
How do credit card late fees work?
It is getting more and more expensive to delay credit card payments. Fortunately, there are consumer protections in place that limit the amount of late payment fees that a credit card issuer can charge, thanks to the Consumer Financial Protection Bureau (CFPB) limiting fees.
If you miss your first payment, you will be charged a credit card late fee. Your first late payment will cost you $30 (as of 2022) or your minimum payment amount, whichever is greater. Credit card issuers may begin charging late fees on the first day of a cardholder’s overdue minimum payment.
How much do issuers charge for credit card late payments?
Lenders can only charge you the maximum delinquency fee if you have repeatedly missed payments.
In 2009, legislators passed a law called the Credit Card Act that limits the amount creditors can charge when a cardholder misses a payment. At the time, issuers typically charged a maximum late payment fee of $39.
In 2010, the Federal Reserve capped the maximum possible fee at $35, but the CFPB adjusts this fee annually for inflation. As a result, even those who are in arrears are now paying significantly more.
As mentioned, if you are paying late for the first time, the maximum amount an issuer can charge you (as of 2022) is $30. But if you miss another payment due within six billing cycles, you can expect to be paid out up to $41.
Lenders often adjust the amount they take based on your current balance. For example, if your card balance exceeds $1,000, you may be charged a higher fee than if you had a balance of several hundred dollars.
Unfortunately, it’s not always easy to know how much an issuer will charge you if you accidentally forget a payment. Many lenders only list the maximum possible card fee on the credit card terms and conditions page. So, when comparing offers, make sure you read the fine print.
How to avoid late fees
Many people forgo credit card payments when they can’t afford to pay all their bills in one month. But this can be a costly mistake, especially if the late payment also results in a sharp increase in the annual interest rate.
If you’re struggling with cash flow, consider borrowing from a friend or family member so you can make at least the minimum payment. Even if that minimum payment is high due to a very large balance, you’d still be better off scraping together enough money to pay it than accumulating repeated $41 late fees.
If your income has been affected by the COVID-19 crisis, please contact your card issuer to see if they can offer fee waivers or payment deferrals. You can also call each of your creditors and ask if they are willing to put together some kind of plan for you in case of difficulties.
If you tend to pay late simply because you’re disorganized or forgetful, set up bill payment reminders with your credit card companies or use automatic payments.
bottom line
If you still feel like you’re at risk of missing a payment from time to time because you’re chronically disorganized or on a tight budget, look for cards that don’t charge late fees – they exist.
Or buy credit union or smaller bank cards with lower fees. Even if you have a bad credit history, you can still opt for a card, such as the Discover it® Secure Credit Card, which waives your first late payment fee (after that, you’ll pay up to $40).
Before skipping a credit card payment, remember that you have options. With a little planning, you won’t have to pay heavy late fees.
Editorial disclaimer
The editorial content on this page is based solely on the objective judgment of our contributors and is not based on advertising. It was not provided or ordered by credit card issuers. However, we may receive compensation when you click on links to our partners’ products.
