Late Fees on Credit Cards
How They Work and How High They Can Go
A late fee is what you're charged when your credit card payment is received after the due date on your bill, or you've paid less than the minimum amount required. When you have a balance on your credit card, your due date will never be less than 21 days after the end of your billing cycle.
The law limits how much credit card issuers can charge for a late fee. As of Jan. 1, 2020, issuers can charge up to $29 the first time you're late or up to $40 if you've been late on your payment more than once within the previous six months. (The 2019 maximums were $1 less.)
As part of the Truth in Lending Act, the Consumer Financial Protection Bureau evaluates late fee limits each year to make sure they align with U.S. inflation.
Furthermore, the late fee can't exceed the amount of the violation. For example, if you were late on a $10 minimum payment, your late fee can't be higher than $10.
Most credit cards determine the fee based on how often you've let your account become past due. But some credit cards have tiered late fees based on your credit card balance. For example, if your balance is less than $1,000, your late fee might be $10, but if it's between $1,000 and $2,000, it might be $20, and if it's more than that, $25.
If you don't pay the late fee before your next billing cycle ends, your next minimum payment will include the regular minimum payment, the late fee, and any past due payment from the previous billing cycle.
How to Avoid a Late Fee
You can avoid late fees by making at least the full minimum payment by the due date. Sending your payment well in advance is important if you mail your payments. If you are forgetful, consider scheduling payments via the credit card issuer's website or through your bank's online bill pay system.
You should also pay close attention to the time of day your payment is due, especially if you know you're going to be cutting it close. If your payment is made after the cutoff time, even if it's on the due date, you can still be charged a late fee. Credit card issuers cannot require your payment to be due before 5 p.m., and some even accept payments up until midnight. Check with your issuer for the specific cutoff time on your card.
When it's close to your due date, make your payment online or via telephone. Some lenders may charge an extra fee for an expedited payment, particularly if a customer service representative helps process the payment. However, that fee may still be less than a late fee.
And if you're not often late on your credit card or loan payments, make sure to ask if you can have your late fee waived. Issuers who can see you haven't had a problem with payments in the past may, in fact, give you a (one-time) break.
Consumer Financial Protection Bureau. "Ask CFPB: I Paid My Bill on Time Last Month and Still Was Charged a Late Fee. How Can That Be?" Accessed Feb. 26, 2020.
Federal Trade Comission. "Credit Card Accountability Responsibility and Disclosure Act of 2009." See Sec. 163. Timing of Payments. Accessed Feb. 26, 2020.
Federal Register. "Truth in Lending (Regulation Z) Annual Threshold Adjustments (Credit Cards, HOEPA, and Qualified Mortgages)." Accessed Feb. 26, 2020.
Consumer Financial Protection Bureau. "§ 1026.52 Limitations on Fees." See (2) Prohibited Fees, section (i) paragraph (A). Accessed Feb. 26, 2020.
Consumer Financial Protection Bureau. "§ 1026.10 Payments." Accessed Feb. 26, 2020.