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Late payment

Q. What happens when my credit card payment is late?

Several major issuers are offering a range of credit card late fees based on a customer's card balance. That's good news for customers with low balances -- they catch a break on fees. It's bad news for folks with big balances -- they face the highest late fees around.

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Citibank, MBNA America and Discover charge $15 late fees to late payers with balances less than $100.

Paying a $15 fee when a $25 payment arrives late is still quite a slap, but it sure beats the standard late fee of $25 or $29.

Credit card customers with big balances are far less lucky. Late payers with balances greater than $1,000 get socked with $35 fees -- the highest late fee on the market to date. Customers with balances between $100 and $1,000 face $25 late fees for tardy payments.

Other card companies refuse to cut low-balance customers any slack on late fees.

First National Bank of Omaha has a two-tiered approach to late fees. Pay late and you'll be slapped with a big fee or a bigger fee, depending on your card balance. If your balance is less than $500, you'll pay a $29 late fee. If your balance is $500 or more, you'll pay a $35 late fee.

At Fleet Bank and First Consumers National Bank, the size of your balance doesn't matter. Anyone who pays late gets slapped with a $35 fee.

In 1978, the Supreme Court ruled that a national bank could charge the highest interest rate allowed in their home state to customers living anywhere in the United States, including states with restrictive interest caps.

When it comes to credit card interest rates, the law in a lender's home state rules. It doesn't matter what kind of rate cap exists in a customer's state.

The same principle applies to credit card late fees. In Smiley vs. Citibank in 1996, the Supreme Court gave national banks free rein on credit card fees as well.

As long as an eye-popping late fee is allowed in a lender's home state, the lender can charge it to customers nationwide.

Because most major credit card companies are based in states with liberal or no usury laws, the sky is the limit with interest rates and late fees.

The best bet for consumers is to pay credit card bills on time every month. These tips will show you how.

Another good strategy is to pay the bill as soon as it arrives, even if you can only make the minimum payment. Giving your issuer the 2 percent minimum payment it wants ASAP is a great way to guard against late fees.

And you can always send a bigger payment later on when you have more cash.


-- Posted: Aug. 14, 2002




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