Credit Cards Without Late Fees? What You Don't Know Can Hurt You
Americans know all too well how much it costs to use credit
cards. The average household in the U.S. now has nearly $10,000
in credit card debt. Carrying such debt is fine, as long as you
realize that there are costs associated with it. The interest
rates aren't particularly low and the fees charged for paying
late or going over your limit can be steep. Late fees of $39
aren't uncommon, and they are assessed if your bill fails to
arrive by the due date, even if it was delayed in the mail.
The credit card companies have been listening to
consumer complaints about expensive late fees and several of
them have responded. American Express and Citibank have both
recently introduced cards that are both advertised as having no
late fees. There may be a twist involved; Citibanks's Simplicity
card carries no late fees as long as you make a purchase each
month within the billing period. But no late fees? Aren't late
fees the card company's way of making sure that you pay your
bill at all? What happens if you don't pay your bill?
That's where the fine print comes into play. Your
agreement requires you to pay your bill on time. With the
Citibank card, paying late carries the usual fee of up to $39 if
you pay late and haven't made a purchase during the billing
period. If you have made a purchase within the billing period,
but you have still paid late, Citibank may, at its option, raise
your interest rate. In fact, they can raise your interest rate
as high as 23.99% above the prime rate. American Express will
also raise your interest rate if you pay late twice in a year,
though not as high as the 30% or so that Citibank will charge.
With interest rates potentially rising to nearly 30% and
applying to your outstanding balance, you'd be much better off
keeping an existing card and paying the late fee than the
hundreds or even thousands of extra dollars you'd pay on a large
balance after the penalty interest rate is applied. Of course,
you can avoid both late fees and interest rate hikes by simply
paying your bill on time and maintaining a small balance or no
balance at all. If you want a card with no late fees, you
probably already have one. Don't pay late, and there is no fee.