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Advocates call late payment penalties “junk fees”
The The Biden administration has focused on working with the Federal Trade Commission and the CFPB to crack down on “junk fees” in all areas of consumers’ lives, including certain credit card penalties.
Some credit card companies charge up to $41 for a missed payment. The goal is to reduce late payment fees to $8, prohibit late payment amounts that exceed 25% of the cardholder’s required payment and end the automatic annual inflation adjustment, the CFPB said in a statement opinion.
These fees are significant for lower-income households who may pay these fees on an ongoing basis, amounting to nearly a few hundred dollars over the course of a year, Schulz said.
The proposed changes are intended to close gaps in the Credit Card Accountability Responsibility and Disclosure Act of 2009, or CARD Act. The law imposed protections on credit card companies, such as: B. Price controls on penalty fees and certain conditions under which they may be imposed. However, there is no limit on the amount of APR that a company can charge, nor on late payment interest.
According to WalletHub, cardholders paid an average of $76.27 in fees and interest per credit card account in the fourth quarter of 2022. With this in mind, it’s worth looking for ways to reduce these additional fees.
“Life is so expensive in 2023 and it’s not getting cheaper anytime soon,” he said.
Cardholders “can ask their card issuers for help,” Schulz said. Those who do “are more successful than most people realize,” he said.
For example, more than three out of four cardholders who applied for a lower interest rate on one of their credit cards last year received one. after to LendingTree. According to a 2022 WalletHub survey, nearly 90% of people who called their issuer about a late fee got it waived.
If you ask your card issuer to lower your interest rate, they may run a credit check to see if anything has changed in your financial situation since you opened the card. However, the savings you could make with the lower interest rate could be worth it as a “small dent in your credit score,” Schulz said.
2. Use autopay, but remember that it is “not perfect.”
Consider setting up automatic payments for your credit card bills so you don’t miss a payment or accidentally pay late.
Don’t lose sight of your monthly statements, though, because “autopay isn’t perfect,” Schulz said.
If you don’t keep track of the due date, you may still end up paying late, and if your balance is higher than expected, you may not pay enough to cover the minimum balance. To avoid paying more interest and fees, make sure you cover the entire statement balance.
“Autopay makes a lot of things easier,
But it doesn’t relieve people of the responsibility to continue to keep track of things,” Schulz added.
You can also ask to change your due date to make it more convenient, said Sara Rathner, credit card expert and author at NerdWallet. This way, you’ll know how much money you have available in your checking account before an automatic payment occurs.
Take advantage of opportunities to minimize surprise fees and get the information you need about your card, he said Winnie Sun, co-founder and managing director of Sun Group Wealth Partners in Irvine, California.
Make sure you’re aware of your charges, whether by routinely checking your statements or setting up push notifications every time your credit card is charged, said Sun, a member of the CNBC Financial Advisor Council. This can help you identify fraud and be aware of the fees and interest incurred.
Finally, if you haven’t read your credit card company’s terms and conditions in a while, contact your card issuer’s customer service department and request a list of fees and associated costs.
“You can contact your card issuer at any time and ask for basic information about your card,” says Schulz.
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