Beware increased credit card fees in 2017
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If you occasionally pay a credit card payment late, 2017 is the year to break this bad habit. The Consumer Financial Protection Bureau (CFPB) has allowed an increase in late payment fees next year and these can now be as high as $38 for a delinquent payment made more than once in a six-month period. If you only miss one within a six-month period, the sting is still $27. That’s not cheap and $38 is even worse. Find out why late fees are on the rise and five other ways overdue payments hurt you.
Which Card Issuers Are Raising Late Fees?
American Express, for one, plans to increase its late payment fees in 2017, and other card issuers may follow suit. The good news from the CFPB report titled “The Consumer Credit Card Market” is that fewer people are incurring penalty fees. The rate of penalty fee occurrence dropped from almost 4% in 2008 to less than 2.5% in 2015. The CFPB study also showed that fees such as late penalties and over limits account for roughly 20% of the total cost of credit.
How Are Late Fees Changing?
In the Credit Card Act of 2009, late fees were capped at $25 for the first late payment in six months and $35 for the second late payment. In 2016, the late payments rose once again. Now, once you go six months without missing a second payment, you’ll go back to paying the lower amount if you run late again. Now it will be $27 and $38, which is not a huge hike but it’s bad enough. According to Nerd Wallet, seven card issuers are currently at the maximum rate and might move up again in 2017.
Five Ways Late Payments Hurt Your Wallet
Paying a late payment on a card balance is the same thing as seeing a hike in your interest rate. It’s cash out of your budget sent to the credit card company. Here are other ways late fees affect yo:
#1 Credit score decline
If you miss a payment by just a day or two or even a week, you’ll pay the fee, but it can get worse from there. If the payment is more than 30 days late, your card issuer could report to the credit bureaus and your FICO score could take a hit.
#2 Grace period canceled
Check out your credit card terms and conditions and you might find that violating your agreement to pay promptly could terminate the grace period you normally enjoy on purchases. That means the second you swipe, interest can accrue.
#3 Meaningless rewards
For those that have a rewards card, you should know that rewards are only beneficial if they outweigh the cost of credit. For instance, if using your rewards card gains you a benefit of $20 that month and a late fee runs $27, you’re not benefiting.
#4 Promotions canceled
Some new card accounts, balance transfer deals, and special promotions come with low or even 0% interest rates. Buried in the terms for that credit card offer is a caveat that if you violate the terms of the promotion, you lose the deal and your rates can rocket sky high.
#5 Higher interest rates
In addition to losing a promotional rate, if you have one, you can be hit with a penalty interest rate. This can kick in once you hit 60 days late on a credit card payment per your card issuer terms and agreements. If you carry a balance, this can start costing you money right away.
Final Thoughts on Credit Card Penalties
To avoid incurring late fees, pay your card payments on time. Set up a calendar and stick to it. You might want to pay on your cards twice a month when you get your bi-weekly paychecks to avoid any interest. Another solid tip is that you shouldn’t buy anything unless you can afford to pay off at month is another solid tip.
If your credit card debt is so out of control that you’re regularly missing credit card payments, are maxed out, and dealing with debt collectors you might need a serious debt intervention. Contact the Law Offices of John T. Orcutt for a free North Carolina bankruptcy consultation today. Call +1-919-646-2654 now for an appointment at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.