Discover is the latest credit card company to introduce a card that waives late fees for customers who are delinquent on monthly payments. The new card, called “Discover it® Cash Back,” has no annual or penalty fees and waives the fee the first time a payment is late. It also has a cash-back rewards program.
Citigroup and Barclays introduced similar credit cards recently. In 2011, Citigroup’s Simplicity card was advertised with no late fees, no penalty interest fees and no annual fee. Barclaycard’s Ring card, introduced in 2012, also features no annual fee or penalty fees, and it allows customers to waive late fees one time a year.
But as attractive as these cards may sound for consumers who are forgetful when it comes to paying on time, there are bigger issues than penalty and late fees. Your credit score will still be dinged by past-due payments of 30 days or more, which will make it more difficult to obtain competitive interest rates on car loans and mortgages.
“This is a lot of marketing sizzle,” John Ulzheimer, president of consumer education at SmartCredit.com, says of the cards. “Most credit card issuers will forgive late fees if you miss a payment from time to time, and have done so for many years.” Good customers can simply ask the credit issuer to waive the fee, he adds, as long as they don’t do it too often.
Ulzheimer says it’s important to look past the marketing hype and realize that credit card issuers will always make a profit. “Credit card issuers will bake in the lost revenue of fee waivers other ways, like with annual fees or higher interest rates. One way or the other, they’ll make it back,” he says. Consumers should instead look for cards that offer competitive terms, low interest rates and good rewards programs.
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