Don’t Pay Late Fees

Here's a piece courtesy of the e-book Banking Secrets Revealed:

One of the primary ways banks make money each year is through the fees they charge their customers.  While some of these fees are understandable an unavoidable, like safe deposit box fees, others are totally within the control of the consumer.  An example of a controllable fee is a late payment fee.  Banks like it when people pay their bills but pay late.  When I was in banking, we called people like this “sloppy payers”.  They paid their bills but incurred a fee allowing the bank to make more money with little effort.

Late payment fees are bad for a number of reasons:

• Late payment fees are expensive – Typical late payment fees on credit cards can now top $39.  If you pay your credit card late, it’s like throwing $39 out the window. 

• Late payment fees can cause the interest rate on your credit card to rise – If you look at the small print on the agreement you received from your credit card company, you may notice that the credit card company has the right to raise the interest rate on your credit card if you pay as little as one day late. This could make a credit card which seemed like a good deal at 9.9% a very bad deal at 21% or more.  Read the fine print and chose your cards carefully.

Example of credit card rates from a major U.S. Bank:

• Annual Percentage Rate for Purchases: 0%* for the first 6 months. Thereafter: 11.24%to 20.24%

• Other APRs:  Balance Transfers: 0%* for the first 6 months. Thereafter:  11.24% to 20.24%. Cash Advances:  22.24%. Delinquency Rate:** 28.24%

• Variable Rate Information:  Your annual percentage rate may vary monthly. The rate is determined by adding a margin to the Prime Rate.*** The margin used is as follows:

• Purchases and Balance Transfers: 3.99% to 12.99%
• Cash Advances: 14.99% (subject to a minimum APR of 19.99%)
• Delinquency Rate: 20.99% (subject to a minimum APR of 23.99%)

• Grace Period: 20-25 days for purchases only

• Method Of Computing The Balance For Purchases: Average Daily Balance Method (including new purchases).

• Annual Fee: $0 the first year and every year that you charge at least one purchase to the account.Otherwise $40

• Minimum or Fixed Finance Charge: $2.00 only in statement periods when interest is due.
  There is a fee of $2.50 per month if a voluntarily closed account carries a balance.

• Other Fees:

• Cash Advance Fee: 4% or $5 minimum
• Overdraft Protection Advance Fee: 3% or $5 minimum
• Convenience Check Cash Advance Fee: 3% or $5 minimum
• Balance Transfer Fee: 3% or $5 minimum
• Cash Equivalent Fee: 4% or $10 minimum
• Late Payment Fee:
     -- Balance over $0 to $99.99 -- $15
     -- Balance of $100 up to $999.99 -- $29
     -- Balance of $1000 and up -- $39
• Overlimit Fee: $35
• Foreign Transaction Fee: 3% of the amount of your transaction in U.S. Dollars

**The Delinquency Rate will apply to all balances in the event the account is 30 days past due once or 5 days past due twice in any twelve (12) month period, OR if your account is over limit two times in twelve consecutive months.

• Late payment fees can affect your credit rating – While one or two late payments may not affect your credit rating significantly, a pattern of late payments can seriously impact your credit rating.  This can affect your ability to get other credit or it could cause your other creditors to raise the rate on the loans you have with them as well. 

There are things you can do to avoid paying late fees:

• Get organized – When your bills arrive each month, organize them by the date order in which they need to be paid.  Put all of your bills in the same place so there’s no need to search for them.  Something simple like an old shoebox works well to hold your bills.  I write the due date on the outside of the envelope so I can see at a quick glance when the bills are due.

• Use online bill payer – One of the nice features of technology is that it can help with day to day tasks.  Most credit unions and banks now offer free online bill pay service.  With online bill pay, all of your bills are organized electronically.  You simply click the mouse on the bill in question and pay it electronically.  You can control when the bill is paid and how much you want to pay.  You receive an electronic confirmation that the bill has been paid.  In addition, on most systems, you can set up email reminders so you get notification before your bill is due.  In addition, if a bill is due at the same time each month, like an electric bill, for example, you can set up the system to pay the bill automatically so you never have to worry about it.

A little planning can go a long way in avoiding late fees.  By taking these simple steps, not only will you have more money in your pocket but you’re credit rating will be higher and you’ll have piece of mind knowing that all of your bills have been paid.

Comments

[Harrison]

Yeah I feel the pain of late payment last 2 months. I have to pay extra due to my forgettery. Now I'm using my reminder in Microsoft Outlook to remind me what bill I should pay 2-3 days in advance. Every time I receive a bill, I just open my outlook and create a reminder for this bill according to the date. I tried this method 2 months now and so far it is working fine with me.

[garyatk]

How about this. Why not pay the bill when it comes, not just before it's due. This will simplify your life and you will never pay a late fee. For those that will say "but I'll be losing interest on my money", I say, Is a few bucks interest earned each month worth the inconvenience of worrying about paying your bills just in time? Most of my bills are set up on an auto pay system anyway. I just look at them when they come and make sure the money is there to cover the draft. Most of them are paid by my credit card where I earn cash back rewards for letting the credit card company pay the bill. When the credit card bill comes, I look it over, and when I see everything is correct, I pay the bill online. Yes, even a couple weeks before it is due. It is done, forgotten about, and helps keep my life simple. Works for me.