If you don’t pay your credit card bill on time, or if you spend over your credit limit, generally your credit card company will hit you with a late fee or overlimit fee, respectively.
In most cases, you will be charged an overlimit fee if you are over your credit limit at any point during the billing cycle. That means that you will be charged an this fee even if you are back under your limit when your monthly statement arrives.
Both late fees and overlimit fees are stated in your terms and conditions for your credit card.
Usually, the late fees are tiered, based upon your balance.
For example, if you pay your bill late and your balance is between $0 - $99.99, you might be charged a $15 fee; if your balance is between $100 - $249.99, it could be a $29 fee; and if your balance is $250 or more, it could be a $39 fee. These fees are just examples, as fees vary for each card.
Late fees are designed to generate a large portion of the credit card company’s revenue. In most cases, the people who are hit with these fees end up paying the highest tier.
Our Recommendation:
- The bottom line is, when choosing a credit card, you should assume that at some point you will be charged the maximum penalty late fee and/or overlimit fee.
- You can avoid late fees by signing up for an automatic monthly minimum-payment deduction from your checking account. Call your credit card company to set this up.
- Overlimit fees can be avoided by:
- Most importantly, calling your credit card company and asking them NOT to allow you to go over your credit limit.
- There are still situations that might take you over your credit limit (even if you have asked them not to allow you to exceed your limit). Therefore, we also recommend that you sign up for online account access, and/or frequently call your credit card’s 1-800 number to be constantly aware of your credit card balance.
- Stay on top of your credit card spending, and never assume that all of your most recent transactions are reflected in your balance. Sometimes it can take a couple of days for the transactions to show up on your account.
