More Credit Card Issuers Reduce Missed Payment Penalties

When looking for a credit card, you should consider the fees that might be charged, from annual fees to balance transfer and other fees.

One of the fees that you might not have to worry about, though, is the late fee.

Some credit card issuers are beginning to make their offerings more attractive by waiving certain fees — at least once.

Getting Rid of Late Fees

dont_be_lateThe new Discover it card features the ability to waive your first late fee.  So, while you might have to pay late fees later, the first time you are late, you won’t have to pay a fee.

The Citi Simplicity credit card is another one that is waiving late fees.  In this case, though, there are no late fees at all.

These cards take away some of the sting for those who forget to pay their bills.  Accidents happen so it’s nice to know there are cards with some flexibility.

In some cases, it might be possible to waive a late fee just by calling your credit card issuer.

If you are a customer who doesn’t have a history of paying late or missing payments, you might have your fee waived just for asking.  Really, you don’t have anything to lose by asking.  Remember to remind the customer service representative that you have been a loyal customer.

Even if your credit card issuer doesn’t have a policy of waiving late fees, you might still be able to save when this type of thing happens.

No Penalty Interest Rates

Another interesting development is that some credit card issuers are getting rid of penalty interest rates.

In the past, many credit issuers would raise your interest rate after a late payment.  You could have a nice low rate and then see your rate skyrocket with one late payment.  It’s one of those things they put into the terms when you sign up (you’re reading those, right?).

This penalty rate could result in higher costs over time through increased interest charges.  Note, though, some cards are getting rid of the penalty interest rate.  You might pay late, and be charged a late fee, but you might not see an increase in your interest rate.

Find out whether or not there is a penalty rate charged when you pay late.  You might be surprised at what you find.  It’s nice to know that at least your interest rate is likely to stay the same, even when you make a mistake.

Your Credit May Still Be Impacted

It’s important to realize that your credit score might still be impacted by late payments.

Your credit card issuer might not be charging you a fee, but your mistake is probably still being reported to the credit reporting agencies.  A late payment is still a late payment, and your payment history is still the most important factor influencing your credit score.

Each payment that you make on your credit card is reported and compiled in your credit history.  That means that your late payment is reported, and appears on your credit report, and can bring your credit score down.  You might not be paying a late fee, but you might pay in other ways.

These red marks can cost you tens of thousand in something like a mortgage.

Bottom Line

Credit card issuers are testing out the idea of not charging late fees.  This can save a little money in the short-term, but it’s no reason to become complacent.  Do your very best to make sure you pay your credit cards on time!

Remember that your late payment can still be reported to credit agencies, and your credit score can suffer.



Published or updated April 15, 2013.

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