Never Pay a Late Fee Again

Ranking above overdraft or NSF fees from the banks, late fees from credit card companies are probably the most hated fees. If you ask them nicely, the credit card companies will sometimes reverse the late fee. It would be much nicer if you don’t have to spend the time begging them. I wrote previously about how to avoid overdraft or NSF fees from the banks. This time I’m going to share a few tips about how to avoid the late fees from credit card companies.

1. Use a card that doesn’t charge a late fee. Not all cards charge a late fee. Some cards actually advertise it as a feature which distinguishes themselves from other cards. If you hate late fees, use one of those cards that don’t charge a late fee. If other cards begin to see that they are losing customers because of late fees, they may stop charging late fees too. Citi Simplicity card doesn’t charge late fees or over the limit fees. I don’t personally use this method because I have a better approach. Read on.

2. Reduce the number of cards you use. The fewer accounts, the fewer payments and due dates to worry about. I have only 3 cards: one for business travel, one for gas and groceries, and one for everything else.

3. Schedule an automatic payment of $100 every month using your bank’s online bill payment function. Set it to a date between your credit card statement closing date and your payment due date. It’s a one-time setup. Then you don’t have to worry about being charged a late fee. The minimum payment for most cards is 2% of the statement balance. $100 should cover the minimum payment in most cases. If you charge a lot, make it $150 or $200 or whatever amount that will always cover the minimum payment. With a minimum payment coming in automatically before the due date, you will never be charged a late fee. You can make up for the rest of the bill by your normal due date. Even if you are occasionally late with your second payment, you may be charged a small finance charge, but you won’t pay a late fee.

4. Let them auto debit. This is what I use now. I turn over the responsibility for making the correct payment on time to the credit card companies. All my cards offer auto debit. If you don’t see it offered online, call up customer service and ask for an enrollment form. I signed up all my cards for it. I let them debit my bank account for the full statement balance on the due date. This way *they* are responsible for making sure my balances are paid in full on time every time. It works perfectly. A side benefit is that I have my money in my bank account for a few extra days. When I was making the payments myself, I usually leave about a week of cushion for possible delays in processing. Now the credit card companies always debit on the exact due date.

This setup also solves the problem of due date creeps. Sometimes credit card companies reduce the grace period and therefore change the due date. If you didn’t pay attention and always pay on the same date, your payment may be late. Now if they are doing auto debit, they are responsible to tracking the due date changes.

What if you have to dispute something? Letting them auto debit doesn’t mean I don’t read the statements. If I find something not right, I can still dispute it. If the amount isn’t high, I’m OK with paying it while disputing it. That just makes it much cleaner. If I win the dispute, I get a credit back. If I lose, I already paid it. Unless it’s an unauthorized charge or a duplicate billing, the credit card protection probably isn’t as strong as they make you believe. In all these years using credit cards, I only had one dispute and it was denied.