If you are late making your credit card payment, your lender will typically charge you a late fee. The late fee will kick in, too, if you pay less than the minimum payment due on your card, or if your payment bounces. Reader Virginia wonders if she can be charged a late fee on a late fee.

The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) lays out that, as of 2022, a credit card late payment fee cannot be higher than $30 for a first late payment. However, if you make another late payment within the next six billing cycles after that first late payment, your issuer can charge you as much as a $41 penalty for each such late payment. A late fee cannot be more than the minimum payment due on the account.

When is a payment considered to be late?

A credit card payment would be considered late if you don’t pay by the due date on the account. The lender would have to receive the payment by 5 p.m. on the due date, or any later cut-off time that the lender has specified.

If the due date falls on a Sunday or holiday, the payment would not be considered late if it was received by the cut-off time on the next business day. If you are mailing your payment, you should be careful to mail it in a timely manner, accounting for potential mail delays.

Electronic and telephone payments must be made by the cut-off time on the due date even if it falls on a holiday (if the bank accepts payments on that day).

Consequences of late payments

If you are late making your card payment, there could also be other consequences besides late fees. For one, your credit score could take a hit.

Your payment history is the most important input to your FICO credit score, accounting for 35 percent of your score. That’s because lenders will see you as a less risky prospect if you pay your bills on time since they’ll be more confident that you can pay back the loan.

If your payment is 30 days past due and your lender reports a late payment on your account to credit reporting bureaus, your credit score will likely fall. That negative input could stay on your credit report for up to seven years.

Another fallout could be an increase in your card’s interest rate. For instance, if your card terms state that a penalty interest rate will apply if you’re 60 days late on a payment, you could end up with a higher interest rate that will make it more difficult for you to pay off your outstanding balance.

Your issuer could also charge off your account if you are behind on payment for six months. That would damage your credit score even further.

In some cases, missing a payment has minimal consequences. For instance, if you’re typically on time but make an uncharacteristic late payment, you can negotiate with your card issuer to forgive your error. However, it’s not a guarantee they’ll grant you mercy, even if your prior payment record is unblemished.

Could credit card late fees go down?

The CARD Act tried to rein in credit card late fees, which were previously unregulated, and initially set them at $25 for a first late payment and $35 for a repeat violation within the next six billing cycles. (These caps first kicked in for 2010 and have been adjusted annually to account for inflation, climbing to the current $30 and $41 limits.)

Lenders were provided a safe harbor for abiding by these CARD Act limits. If they wanted to charge more than that, they were required to justify their fees from a cost perspective. That’s why most lenders stick to the safe harbor limits.

The CFPB is currently looking into whether today’s inflation-adjusted caps are justified considering lender costs. The consumer advocate’s policymaking could even bring down these late fees if it concludes that lender costs do not justify the current inflation-adjusted fees.

Can a lender charge a late fee on a late fee?

As for the question of whether a lender can charge a late fee on a late fee, you will incur an interest charge on late payment fees. That comes about since your late fee will be added to your outstanding card balance. This balance is assessed interest daily if you haven’t paid off your card balance in full and carry a balance. That means you will be charged a daily interest rate on the late fee, too.

For instance, if you missed a payment in your last billing cycle, you would be charged a late fee in your current billing cycle. And that late fee would be assessed daily interest (at your current annual percentage rate) from when it posts on the first day of the current billing cycle.

The bottom line

If you don’t get your credit card payment in by the due date, you will be assessed a late fee. This late fee will be added to your outstanding balance and assessed interest daily. Virginia, that has the effect of your late fee continuing to balloon.

Besides paying a late fee, missing a payment could also mean other negative consequences for you, such as hurting your credit score and increasing your card’s APR.

For all these reasons, it’s important to stay on top of your credit card bills and pay at least the minimum on time, every time.