Expensive Credit Card Slipups

You can use your credit card free, but it requires you to “color inside the lines” so to speak. Make a mistake and it could cost you.

Paying on the due date. Normally, internet and phone credit card payments take a day or two to post to your account. Which means that if you make an internet or phone payment on the due date, it would actually be late. You can speak to a representative to expedite your payment and avoid a late fee, but you’ll pay a late fee for that convenience. The expedited payment fee is cheaper than a late fee, but it’s still a fee.

Pay late. Your credit card issuer has to receive at least the minimum payment by 5pm on the payment due date. If not, you’ll be charged a late fee. Pay one minute late or one dollar less than the minimum payment and your card issuer can charge a late fee up to $25. Your next credit card payment will include the regular minimum payment plus your late fee.

Pay late twice in six months and your card issuer can charge a late fee as high as $35. If you’re late two consecutive months, i.e. 60 days late, your credit card issuer can also raise your interest rate to the penalty rate. The penalty rate is often above 25% and results in higher finance charges.

Even though the credit card issuer is required to lower your penalty rate after you’ve paid on time for six billing cycles, they can leave the penalty rate in effect for new purchases. That means you’ll pay more interest on everything you purchase after that 60-day payment delinquency.

Not confirming your checking account balance before paying. You can opt-out of overdraft fees on your checking account and overdraft debit card transactions will be declined and checks will be returned for non-sufficient funds. If there’s not enough money in your checking account to cover your credit card payment, your card issuer will charge a returned check fee up to $35. Your bank might also charge a non-sufficient funds fee.

Not only should you confirm that you have enough money in your checking account at the time you write the check, but also be sure that your outstanding transactions won’t deplete your balance.

Not paying your charge card in full. If you have a charge card, you’re expected to pay your balance in full every month. Do that and you won’t pay interest. However, if you’re late, your card issuer will charge late fee up to $35. Two months late and you’ll be charged the greater of $35 or 3% of the balance. Worse than the fee, your spending privileges may be reduced or suspended.

Using a convenience check, especially without reading the terms. Your credit card issuer may send a few convenience checks in the mail. And you may use the checks assuming they’ll be treated like a credit card purchase. However, purchases made with convenience checks are processed as a cash advance which means you’ll be charged a cash advance fee, receive no grace period on the transaction, and pay the higher transaction fee.

One of the best ways to avoid expensive credit card fees is to know which fees your credit card will charge and when. Read your credit card terms and pay attention to your credit card statement so fees won’t sneak up on you.