Credit cards are flexible financial instruments since defaulting on payments can lead to late payment charges, which adversely affect one’s credit score while raising the level of debt. This guide aims to impart some real-life strategies for avoiding these late payment charges and maintaining financial well-being.
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How to Avoid Credit Card Late Payment Charges?
When you miss a credit card due date, a late payment fee is usually charged by the issuer. Interest on any unpaid balance would also accrue, and additional late payments could put you into penalty APR territory. In general terms, these fees vary from one credit issuer to another but can range from $3 to $10, depending on your balance.
Effective Strategies to Avoid Late Payment Charges
1. Set Up Automatic Payments
The best way to keep yourself aligned with timely payments is to set auto-debit at your bank. Click here to know How do automatic debit payments from my bank account. An automatic deduction would at least cover the minimum amount due so that late fees would not come into play, and your account would remain in good standing.
2. Enable Payment Reminders
In case you prefer to make payment manually, you can bank on the mobile banking app or other alerts, such as email or SMS reminders, about the due dates coming up. As a nice backup, setting a reminder on your phone calendar could also help.
3. Choose a Suitable Billing Cycle
Credit card companies usually allow you to choose your billing cycle. Thus, select a due date that is close to your salary credit date, ensuring you actually will have funds to pay your credit card by the due date.
4. Pay at Least the Minimum Due
Otherwise, if you cannot pay the entire balance, at least pay the minimum due to avoid late charges. This is not a long-term solution, though, because collecting interest continues on the remaining balance.
5. Schedule Payments in Advance
As bank processing times sometimes vary, make the payment a few days before the due date to avoid failing the penalty because payments made on the due dates may not reflect instantly.
6. Link Your Credit Card to Multiple Payment Methods
Under the umbrella of choice is the provision for payment by Internet banking, UPI, debit card payments, or mobile wallets, which help avoid defaulting on an installment because of technical glitches or insufficient funds at times.
Must Read: What is the Credit Card Billing Cycle? How It Works
7. Opt for EMI Conversions if Facing a Cash Crunch
Large dues can be converted to an installment method of repayment to avoid penalty fees on tardy payments and ease the burden of paying outstanding loans. Most banks lower interest for amounts on EMI than for revolving credit balances.
8. Use a Budgeting App to Track Expenses
Financial management applications classify expenses and remind of payments due. Such applications ensure that either by experience or by budgeting, you allocate funds for credit card payments before spending on non-essentials.
9. Maintain a Low Credit Utilization Ratio
Keep your expenditure less than 30% of your credit limit to make monthly payments smoother and also cut down the chances of overlooking due dates due to financial stress.
10. Request a Waiver for First-Time Late Payments
For some issuers, if a repayment history is good, the late fee can be waived as goodwill for missing a due date by mistake. Customer support can be contacted to request a waiver.
What Happens If You Consistently Miss Payments?
Repeated late payments can have severe consequences:
- Negative Impact on Credit Score: Late payments lower your credit score, making it harder to secure loans in the future.
- Higher Interest Rates: Some issuers impose penalty APRs, significantly increasing interest charges on outstanding balances.
- Credit Limit Reduction: Banks may lower your credit limit if they notice frequent late payments, affecting your financial flexibility.
Final Thoughts
Credit card late payment fees are things you need to avoid if you have to remain in good financial condition. Settle for automated payments and budget, and keep your billing cycle at the back of your mind to avoid certain fees. Simple steps, but in the end, they will allow enjoying the benefits derived from credit and avoid being caught in the debt trap.
