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 and 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.
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 shoe box 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.
Sick of Paying Bank and Credit Card Fees? Here 's How to Avoid 3 of the Most Common
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.
Banks, credit card companies, and other businesses love to charge you fees for violating their rules. Whether it 's late fees, ATM fees, check stop-payment fees, overdraft fees, bounced-check fees, or any other fee, businesses are determined to get every dime out of you they possibly can. But there are ways you can avoid paying these fees. You just have to be shrewd. Here 's how to avoid paying three of the most common fees.
(1) ATM Surcharges -- Any time you use an ATM that doesn't belong to your bank, you're going to pay for it. Sometimes the charge is only a dollar. But it can be as high as $4 or more, depending on the bank. And sometimes your own bank will charge you for using another bank 's ATM. That makes for a really expensive withdrawal.
How to Avoid -- The best way to avoid these fees is to plan ahead and withdraw money from an ATM your bank owns. But you do have another option. Many grocery stores, drugstores, and discount stores (such as Wal-Mart) will allow you to get cash back from the register when you use a debit card to check out. The bank you use typically won't charge you for these transactions.
(2) Credit Card Overdraft Protection -- Many banks offer a credit card to protect you from overdrawing your checking account. But the protection comes with a price. While the fees are usually cheaper than overdraft charges, they're still expensive. Most of the cards will charge a fee each time the protection is used (up to $20 per transaction). And they count the transaction as a cash advance, which almost always carries a higher interest rate. To make matters worse, the transaction begins to draw interest the day it 's made. There is no grace period.
How to Avoid -- The most obvious way to avoid this is to keep enough cash in your checking account to make sure you never overdraw the account. If that 's too difficult, put some money in a savings account and set it up as your overdraft protection. Just make sure you put the money back as soon as you can. Otherwise, you'll deplete your savings.
A Word of Caution -- Many banks will charge you a hefty fee for overdrawing your account. And they'll charge the fee each time you do it. So if you use a check card or debit card to purchase small items, such as coffee or meals, each purchase that overdraws your account will rack up another $30+ charge to your account. Before you know it, you're charged $150 without even trying.
(3) Credit Card Late Payment Fee -- When you use a credit card, you have to make a payment by the due date. If you don't, the credit card company charges a huge fee (up to $39), and it damages your credit report. Even worse, credit card companies do everything they can to make you late for your payment. For instance, they have the due date on Sunday. But the company is closed on Saturday and Sunday. So the payment is actually due on Friday. If you plan to have your payment arrive on time, the mail won't arrive until Monday -- and you get slapped with a late fee. They also change their mailing address with no warning. If you make payment using auto-bill pay, you'll mail the check to the wrong address. And the company won't give you credit for the mistake.
How to Avoid -- If your bank offers a bill-pay feature, see if it also accepts electronic bills directly from your credit card company. If so, you can sign up for electronic billing and then set up your payments to be paid either immediately upon receipt of the bill or by the payment due date. Either option will allow you to avoid late charges. If electronic bill-pay is not an option for you, you'll need to make your payments early or get rid of your credit cards and use cash only. Actually, there 's one other choice, but not many cards offer it. Some credit cards will let you sign up for the company to withdraw the full amount due on the due date from your checking account. I don't like the idea of giving them access to your checking account, but it 's usually better than paying late-payment fees.
