One of the primary ways banks make money each year is through the fees they
charge their customers. While some of these fees are understandable and
unavoidable, like safe deposit box fees, others are totally within the control
of the consumer. An example of a controllable fee is a late payment fee. Banks
like it when people pay their bills but pay late. When I was in banking, we
called people like this "sloppy payers". They paid their bills but incurred a
fee allowing the bank to make more money with little effort.
Late payment fees are bad for a number of reasons:
Late payment fees are expensive - Typical late payment fees on credit cards
can now top $39. If you pay your credit card late, it's like throwing $39 out
the window.
Late payment fees can cause the interest rate on your credit card to rise -
If you look at the small print on the agreement you received from your credit
card company, you may notice that the credit card company has the right to raise
the interest rate on your credit card if you pay as little as one day late. This
could make a credit card which seemed like a good deal at 9.9% a very bad deal
at 21% or more. Read the fine print and chose your cards carefully.
Late payment fees can affect your credit rating - While one or two late
payments may not affect your credit rating significantly, a pattern of late
payments can seriously impact your credit rating. This can affect your ability
to get other credit or it could cause your other creditors to raise the rate on
the loans you have with them as well.
There are things you can do to avoid paying late fees:
Get organized - When your bills arrive each month, organize them by the date
order in which they need to be paid. Put all of your bills in the same place so
there's no need to search for them. Something simple like an old shoe box works
well to hold your bills. I write the due date on the outside of the envelope so
I can see at a quick glance when the bills are due.
Use online bill payer - One of the nice features of technology is that it can
help with day to day tasks. Most credit unions and banks now offer free online
bill pay service. With online bill pay, all of your bills are organized
electronically. You simply click the mouse on the bill in question and pay it
electronically. You can control when the bill is paid and how much you want to
pay. You receive an electronic confirmation that the bill has been paid. In
addition, on most systems, you can set up email reminders so you get
notification before your bill is due. In addition, if a bill is due at the same
time each month, like an electric bill, for example, you can set up the system
to pay the bill automatically so you never have to worry about it.
A little planning can go a long way in avoiding late fees. By taking these
simple steps, not only will you have more money in your pocket but you're credit
rating will be higher and you'll have piece of mind knowing that all of your
bills have been paid.
