5 Ways To Prevent Credit Card Late Fees

Paying a credit card late fee is the same as throwing your money away. Late credit card payments can also hurt your credit score. The payment tips and strategies here will show you how to prevent these costly fees.

When credit card companies process credit card payments, every single detail is extremely important. Get even one of these small details wrong and you will have to pay credit card late fees.

The Fair Credit Billing Act requires credit card companies to credit payments the day they are received. However, this law also allows each credit card issuer to set their own specific payment guidelines. If any of these guidelines are not met, the credit card company can take as much as five days to credit the payment.

That means you can get your payment to your credit card company on time and it could become late during that five-day period. The credit card company could legally charge you credit card late fees. So it's in your best interest to follow their payment guidelines carefully. The payment guidelines are usually on the back of your credit card bill.

Here is the five best ways to prevent credit card late fees.

1. Follow Credit Card Payment Guidelines Carefully

This includes everything from a specific payment address to the time of day the payment has to be received to be credited that day. Some companies even require that payments arrive in their preprinted envelope they sent you with your bill. To be safe, always use the preprinted envelope provided by a credit card company.

Include the billing coupon, and write the amount you are paying in the box provided. Make your check legible, don't forget to sign it and double check that the payment amount is correct. Write your credit card account number on your check and send the payment with the proper postage to the payment address requested by the credit card company.

2 Pay The Minimum Payment Immediately


The best way to prevent paying a credit card late fee is to pay your bill as soon as it arrives. Even if you can only make the minimum payment, it's better than paying a late credit card payment. You can always make additional payments later to keep your interest costs down.

3 Change Your Due Date

Most major credit card companies allow you set your own due date by just asking. Set your due date so your credit card bill arrives right after you get paid.

4 Automatic Online Payments

Paying bills online is also another good way to avoid paying a credit card late fee. Most major credit card companies are accepting credit card payments online. Just sign up for the service on the card company's web site. Make sure to choose a payment amount that automatically covers the minimum amount due on your credit card each month. You can always make additional payments later to keep your interest costs down.

5 Make Your Payment By Phone

Most major credit card companies will accept payments by phone. Some of them will charge fees, ranging from $5 to $15 for the service. But credit card late fees cost you much more so it's better to pay the small fee than a late credit card payment fee. Call the toll-free number on the back of your credit card. They will ask you for a check number and the bank routing number, which is printed at the bottom of every check.

If you do get hit with a credit card late fee, try calling the credit card company and ask if they will waive it. Many credit card companies will waive late credit card payment fees as a courtesy to customers with good payment records.

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5 ways to get credit-card savvy

The good thing about credit cards is that they let you make purchases when cash isn't an option. The not-so-good thing: They tempt you to impulsively charge items you don't really need. Keep in mind that every time you use a credit card, you're borrowing money. So think of credit-card debt as a high-interest loan, and consider these five smart ways to use credit cards:



SHOP AROUND With hundreds of credit cards to choose from, it's smart to shop for the best deal--a card with no annual fee and a low APR (annual percentage rate)--advises Pat Martin, a financial consultant at Ryan Martin Associates in New York. Read the fine print to see if a low APR is a promotional rate that expires after a few months and then leaps up, often dramatically, particularly if you make one late payment. If you plan to pay your bill in full each month, look for a low annual fee and a long grace period--the time between the statement date and the payment-due date in which you'll avoid finance charges. If you plan to carry a balance, go for the lowest interest rate. Also look for a low rate on cash advances. Comparison-shop at Cardweb.com and Bankrate.com.



IMPROVE YOUR CREDIT RECORD A credit report is a snapshot of your debt-paying activity; your credit (FICO) score--a number ranging from 350 to 850--predicts whether you're a good credit risk (above 620 is considered respectable). The higher your score, the better your chances of getting a low interest rate on a credit card, car loan or mortgage. Charging near the limit or maxing out credit cards can lower your score, Martin says. Get a copy of your credit report at least yearly from the three major credit bureaus (equifax.com or [800] 685-1111; experian.com or [888] 397-3742; transunion.com or [800] 916-8800) and challenge any errors. (Under a new law, by September 2005 all consumers will be able to get a free credit report.)

LIMIT YOUR NUMBER OF CARDS A wallet filled with credit cards (which represent money you owe or can borrow) may work against you when you apply for a loan or mortgage. Two or three cards are enough, Martin says. If your credit report indicates that you already owe or can access a great deal of money, potential creditors may determine that added debt could strain your ability to repay.



SWITCH BALANCES CAUTIOUSLY If you transfer your high-interest balances to a low-interest credit card, be aware that the low rate may last for only a limited time, and that many credit-card companies assess transaction fees, sometimes up to 4 percent of the amount transferred. Avoid cards that charge hefty fees, which may outweigh any savings offered by a lower interest rate. Scrutinize the application or call a company representative and ask about all charges before signing up. Once you transfer the debt, stop using the old card.



AVOID CREDIT PITFALLS Despite the benefits, there are pitfalls that accompany credit-card use: It can be costly, with some interest rates higher than 25 percent and whopping annual fees, finance charges and penalties that can jack up the purchase price. And you risk spending more than you can pay. Calculate how much you can afford to charge each month, then put your receipts in an envelope and keep a running total on the outside. Once you reach your limit, put away the plastic.

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9 Ways To Avoid Credit Card Pitfalls

1. Be aware that the card issuer has a great deal of leeway. They reserve the right to change the terms of your card, including the APR (annual percentage rate), at any time, for any reason—with as little as 15 days notice. So check your monthly statement carefully.

2. Even if you make your credit-card payments on time, the bank can raise your interest rate automatically if you're late on any other payment elsewhere (such as a water or heating bill, or an outstanding charge on any other account). This is called "universal default."

3. Your credit score—commonly referred to as the FICO score—has become a vital statistic for Americans seeking credit, and can be widely shared. Even if you don't think you have a credit problem, numerous studies—including one by the General Accounting Office—indicate that 70 percent of credit reports have some sort of error! Check your credit report at least once a year—since your credit report is the basis of your all-important credit score, you want it to reflect your true credit history. A free resource: www.annualcreditreport.com.

4. There is no limit on the fee a credit-card company can charge a cardholder for being even an hour late with a payment. That's due to a 1996 U.S. Supreme Court decision (Smiley v. Citibank) that lifted the existing restrictions on late penalty fees. Today, $30 is the most common late fee, according to the Consumer Credit Counseling Service. Ten years ago, that number was $13.

5. There is no federal limit on the interest rate a credit-card company can charge. Take a look at your credit-card statement. Most likely, the return address is located in a states where state governments have weak "usury laws." These usury laws determine whether or not there is a cap on the amount of interest that can be charged on a loan.

6. It's possible to negotiate better terms if your interest rates change or you have received a penalty fee. Always call your card issuer to try to negotiate these terms.

7. Most lenders like a debt payments-to-income ratio with not more than 36 percent of a consumer's gross income, according to the Consumer Credit Counseling Service of Greater Dallas. In other words, for every $1,000 of income, don't have more than $360 going to pay debts. If you exceed this ratio and want more credit or a better interest rate, you'll have to reduce your debt or increase your income.

8. Specialty cards and department-store cards usually have higher interest rates than general-purpose cards like Visa or MasterCard. While they may save you 10 percent on your first purchase, you'll likely end up paying for it in the long run.

9. One late payment can result in a significant drop in your credit score—of up to 100 points—so pay on time every time. A drop in your credit score of just 50 points can mean you pay $100 more a month in your mortgage payment.