What is a late payment fee?

If you’ve ever looked at your credit card statement, you’ll notice a minimum amount payable every month. If you don’t make this minimum payment on your balance, your bank will issue you a late payment fee. This is a fee that you will have to pay on top of your balance if you don’t make your minimum payment. This fee won’t just be charged for one month, you will have a late payment fee added to your balance every month you don’t pay your minimum. 

Obviously, late payment fees make a bad situation even worse and increase the size of your repayment obligations. That’s why, if you have trouble paying your credit card balance, you should at least pay your minimum payment so that you don’t have a late payment fee.

Tips to avoid late payment fees

Schedule automatic payments

Most likely, your bank allows you to schedule your credit card payments in advance. This is a great way to avoid late payment fees, since you don’t have to think about when to pay this debt each month and will have the money automatically taken out of your account to pay your minimum balance.

Don’t spend more than you can afford

By keeping your spending at a reasonable amount, you can make sure that you always have enough money to pay your minimum balance and avoid any late payment fees. One way to help with this is by budgeting your spending each month.

Set alerts

Instead of scheduling automatic payments for your account, you can set alerts to remind you to make your payments on time. There are a few different ways to do this: you could make a note in your personal calendar or set a recurring monthly reminder on your phone. Some banks will even send alerts to you as a reminder to make your payments. These can all be helpful ways to keep you from missing a payment. But always remember to keep buffer day(s) between your payment transfer instruction date and the actual payment due date – just in case the payment instruction date falls on a public holiday, your payment will only be made on the next business day, which again could result in a late fee charge! So, it’s advisable to schedule the actual payment at least 1 or 2 days before the actual payment due date, depending upon whether there are public holidays during that month.

It could get worse

It’s not only that late payment fees cost you money, but there are also other bad outcomes that will affect your financial health. If you don’t make payments on time, your credit card interest rate may go up, costing you more money in the future. Also, late payments may show up on your credit report, and could cause your credit score to drop, making it harder for you to get credit.

Late payment fees represent penalties you should never have in your life. Not only do they cost you money, they don’t give you anything in return. So, always do your best to at least pay your credit card minimum balance so that you don’t get in a situation you’ll regret.