American Express Late Fees to Rise in Wake of Feds Raising Credit Card Fee Restrictions
If you’ve ever made a late payment on a credit card, you know that it can result in significant costs in additional interest, as well as a cost to your credit score – but the immediate costs of that late payment are about to go a bit higher, with American Express announcing that the company will be raising its fee for late payments. According to Consumer Affairs, starting in January 2017, American Express late fees will rise to $38 for customers who are late on more than one AmEx payments within a six-month period.
Does this rate fee hike sound excessive? It’s actually not a huge change; the current late fee is $37. But this change in credit card late fees is part of a broader trend in the credit card industry of companies charging increasingly higher fees for late payments. If AmEx is any indicator, there might be other credit card companies that could raise their fees in 2017, as credit card issuers tend to follow other companies’ pricing and fee policies in order to stay competitive and profitable.
In 2009, in the aftermath of the financial crisis, Congress passed the CARD Act, which cut down on credit card fees and required issuers to provide more detailed information for borrowers to understand the full costs of credit – such as those letters that come with your credit card statement that explain how much interest you will owe if you pay only the minimum amount due for 3 or 10 years. The goal was to help consumers avoid excessive penalties and fees when borrowing money, while also helping consumers understand their rights and options. Average credit card late fees declined from $39 in 2009 to $35 in 2013, but credit card companies have started to increase their late fees in the past 4 years, as federal rules have relaxed the limits on credit card issuers.
Is the credit card late fee increase going to be a noticeable difference for most consumers? Possibly not: Consumer Financial Protection Bureau studies (cited by Consumer Affairs) have found that only 20% of credit card customers routinely get charged a late fee.
However, if you want to avoid incurring late fees, here are a few tips:
- Set a reminder on your calendar (with notifications/alerts!) to pay your credit card bill – but check your statements carefully; many accounts have a different due date each month.
- Make a minimum payment on time – even if money is tight and you cannot afford much, make sure you cover at least the minimum payment on any credit card accounts before the due date. You’ll still incur interest charges that go with carrying a balance, but you will avoid that pesky late fee.
- Set up automatic payments – if you are paying off a large balance over time, set up a monthly automatic payment (if possible) to be applied to your credit card balance prior to the due date. This can help avoid late fees while chipping away at your overall credit card debt.
Late fees are one way for credit card companies to make money off of their customers, but you don’t have to let these fees affect you. With some careful planning and foresight, you can make sure that your credit card account stays up-to-date and free of late fees.