{"id":37188,"date":"2023-07-18T07:21:42","date_gmt":"2023-07-18T11:21:42","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/helping-consumers-or-pure-profit-for-banks-the-latest-in-the-credit-card-late-fee-debate\/"},"modified":"2023-07-18T07:21:44","modified_gmt":"2023-07-18T11:21:44","slug":"helping-consumers-or-pure-profit-for-banks-the-latest-in-the-credit-card-late-fee-debate","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=37188","title":{"rendered":"Helping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate."},"content":{"rendered":"
\n

This <\/em>article<\/em> is reprinted by permission from <\/em>NerdWallet<\/em>.\u00a0<\/em><\/p>\n

In a time when inflation is driving up the cost of nearly everything you buy, something else has increased, too: credit card late fees. Thanks to a clause in the\u00a02009 Credit Card Act, credit card issuers can raise late fees, and over time those fees have risen to current maximums of up to $41.<\/p>\n

\n

The Consumer Financial Protection Bureau\u00a0recently proposed a rule\u00a0that would slash credit card late fee maximums by 75%, to $8 per late payment. While lower fees may seem like a good thing for the consumer, some argue that paying less could do more harm than good. According to the American Banking Association, such a reduction \u201cwill result in more late payments, higher debt and lower credit scores.\u201d<\/p>\n

See<\/strong>: Feds move to crack down on \u2018excessive\u2019 credit-card late fees<\/p>\n

Habitual late payments can indeed damage your credit score, which impacts access to credit and how much you\u2019ll pay in interest. And as payment due dates pile up, late payments can lead to an escalation of debt. That escalation is especially concerning when, according to a first-quarter 2023 study by TransUnion
\n TRU,
\n +0.65%<\/bg-quote>,<\/span>
\n credit card debt is at near-record levels, rising nearly 20% year over year.<\/p>\n

Late fees: Deterrent or profit source?<\/strong><\/h2>\n

The CFPB argues that credit card companies are using late fees to pad their bottom lines, not to help people manage their financial health. A 2022 Federal Reserve report shows that credit card fees \u2014 including late fees in particular \u2014 account for about 15% of total credit card profitability. And according to the CFPB\u2019s 2021 Consumer Credit Card Market Report, that cost is borne most by the customers who can least afford it. The report shows that of the over $14 billion in late fees paid by consumers in 2019, subprime and deep subprime consumers paid 42% of that total while representing just 12% of total accounts.<\/p>\n

While lobbying organizations like the ABA may have a valid point about the long-term dangers of lower late fees for consumers, it\u2019s important to remember their bias. As Scott Gilpatric, a behavioral economist at the University of Tennessee who specializes in procrastination and self-control, puts it, \u201ccredit card companies aren\u2019t trying to set up a mechanism in the consumer\u2019s interest. They\u2019re trying to maximize their own profits.\u201d<\/p>\n

See: <\/strong>Growing \u2018debt divide\u2019 in the U.S. sees some pulling ahead as others fall further behind\u00a0<\/p>\n

Consumers can employ alternative guardrails<\/strong><\/h2>\n

Steep\u00a0late fees\u00a0aren\u2019t the only way to help lessen the damage of late payments. The CFPB argues that new digital notification deterrents can motivate late-paying customers in lieu of high fees, making the current policy obsolete.<\/p>\n

According to Wei Zhang, deputy assistant director of the CFPB\u2019s Office of Consumer Credit, Payments, and Deposits Markets, \u201cThese days the vast majority of credit card borrowers are enrolled in online banking, and nearly two-thirds use a mobile app for their card.\u201d<\/p>\n

Consumers also have ready access to their\u00a0credit scores, so they witness the impact of late payments in nearly real time. \u201cThat\u2019s a powerful incentive to get their payment in before the next due date,\u201d Zhang says, \u201cseparate and distinct from any late fee they\u2019ve been charged.\u201d<\/p>\n

Do longer-term consequences change consumer behavior?<\/strong><\/h2>\n

While increased notifications and credit score monitoring may be useful, experts question whether these alone would be sufficient to dissuade late-paying consumers. A 2022 ABA-commissioned survey showed that 46% of respondents said avoiding a late fee was the most important reason to pay on time. In that same survey, 83% of respondents said that a $10 late fee would be insufficient to deter them from paying a credit card bill late.<\/p>\n

Data from\u00a0NerdWallet\u2019s latest Consumer Credit Card Report\u00a0seems to support this argument. In a March 2023 survey conducted online by The Harris Poll on behalf of NerdWallet, Americans who would miss a credit card payment say that a late fee of $30, on average, would prevent them from ever missing a payment.<\/p>\n

Gilpatric notes that while the effects of paying late such as a reduction in credit score are ultimately more impactful for the consumer than a $30 late fee, that long-term consequence isn\u2019t necessarily effective at driving short-term consumer behavior.<\/p>\n

If issuers truly wanted to deter late payments, Gilpatric argues, there are stronger mechanisms available. \u201cIf the moment you are late on a payment your credit card becomes deactivated,\u201d he argues, \u201cthat would be a big wake-up call.\u201d<\/p>\n

Plus<\/strong>: \u2018That can actually throw you into a tailspin\u2019: Monthly credit card fees have been a rarity\u2014until now<\/p>\n

How to avoid credit card late fees<\/strong><\/h2>\n

Regardless of where the ruling lands on the future of late fees, you can take proactive measures to avoid these penalties, such as:<\/p>\n

Due date notifications<\/strong><\/p>\n

Whether through the credit card issuer if they offer this feature or using your personal calendar, setting reminders of your upcoming due date will help you avoid late payments.<\/p>\n

Use autopay<\/strong><\/p>\n

Enabling\u00a0automatic payment\u00a0will guarantee that you never again face a late fee. If you\u2019re not sure that you can pay in full each time, set your autopay to cover the minimum payment due, then pay the balance of your bill separately as your budget allows.<\/p>\n

Request a late fee waiver<\/strong><\/p>\n

If you\u2019ve been hit with a late fee from an issuer for the first time, it\u2019s worth asking to have the late fee waived. Some issuers will grant this upon request.<\/p>\n

More From NerdWallet<\/strong><\/p>\n

Jaime Hanson writes for NerdWallet. Email: jhanson@nerdwallet.com.<\/em><\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

This article is reprinted by permission from NerdWallet.\u00a0 In a time when inflation is driving up the cost of nearly everything you buy, something else has increased, too: credit card late fees. Thanks to a clause in the\u00a02009 Credit Card Act, credit card issuers can raise late fees, and over time those fees have risen […]<\/p>\n","protected":false},"author":1,"featured_media":37189,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-37188","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nHelping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"This article is reprinted by permission from NerdWallet.\u00a0 In a time when inflation is driving up the cost of nearly everything you buy, something else has\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=37188\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Helping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate. | iFintechWorld\" \/>\n<meta property=\"og:description\" content=\"This article is reprinted by permission from NerdWallet.\u00a0 In a time when inflation is driving up the cost of nearly everything you buy, something else has\" \/>\n<meta property=\"og:url\" content=\"https:\/\/ifintechworld.com\/?p=37188\" \/>\n<meta property=\"og:site_name\" content=\"iFintechWorld\" \/>\n<meta property=\"article:published_time\" content=\"2023-07-18T11:21:42+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-07-18T11:21:44+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/07\/1689679303_social.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"1279\" \/>\n\t<meta property=\"og:image:height\" content=\"640\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"News Room\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"News Room\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/ifintechworld.com\/?p=37188#article\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=37188\"},\"author\":{\"name\":\"News Room\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\"},\"headline\":\"Helping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate.\",\"datePublished\":\"2023-07-18T11:21:42+00:00\",\"dateModified\":\"2023-07-18T11:21:44+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=37188\"},\"wordCount\":933,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"keywords\":[\"Featured\"],\"articleSection\":[\"News\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/ifintechworld.com\/?p=37188#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/ifintechworld.com\/?p=37188\",\"url\":\"https:\/\/ifintechworld.com\/?p=37188\",\"name\":\"Helping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate. | iFintechWorld\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/#website\"},\"datePublished\":\"2023-07-18T11:21:42+00:00\",\"dateModified\":\"2023-07-18T11:21:44+00:00\",\"description\":\"This article is reprinted by permission from NerdWallet.\u00a0 In a time when inflation is driving up the cost of nearly everything you buy, something else has\",\"breadcrumb\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=37188#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/ifintechworld.com\/?p=37188\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/ifintechworld.com\/?p=37188#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/ifintechworld.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Helping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate.\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/ifintechworld.com\/#website\",\"url\":\"https:\/\/ifintechworld.com\/\",\"name\":\"Repay Down\",\"description\":\"Latest Personal Finance News, Tips and Updates\",\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/ifintechworld.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/ifintechworld.com\/#organization\",\"name\":\"Repay Down\",\"url\":\"https:\/\/ifintechworld.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"width\":558,\"height\":90,\"caption\":\"Repay Down\"},\"image\":{\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\",\"name\":\"News Room\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"caption\":\"News Room\"},\"sameAs\":[\"https:\/\/ifintechworld.com\"],\"url\":\"https:\/\/ifintechworld.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Helping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate. | iFintechWorld","description":"This article is reprinted by permission from NerdWallet.\u00a0 In a time when inflation is driving up the cost of nearly everything you buy, something else has","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/ifintechworld.com\/?p=37188","og_locale":"en_US","og_type":"article","og_title":"Helping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate. | iFintechWorld","og_description":"This article is reprinted by permission from NerdWallet.\u00a0 In a time when inflation is driving up the cost of nearly everything you buy, something else has","og_url":"https:\/\/ifintechworld.com\/?p=37188","og_site_name":"iFintechWorld","article_published_time":"2023-07-18T11:21:42+00:00","article_modified_time":"2023-07-18T11:21:44+00:00","og_image":[{"width":1279,"height":640,"url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/07\/1689679303_social.jpeg","type":"image\/jpeg"}],"author":"News Room","twitter_card":"summary_large_image","twitter_misc":{"Written by":"News Room","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/ifintechworld.com\/?p=37188#article","isPartOf":{"@id":"https:\/\/ifintechworld.com\/?p=37188"},"author":{"name":"News Room","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61"},"headline":"Helping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate.","datePublished":"2023-07-18T11:21:42+00:00","dateModified":"2023-07-18T11:21:44+00:00","mainEntityOfPage":{"@id":"https:\/\/ifintechworld.com\/?p=37188"},"wordCount":933,"commentCount":0,"publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"keywords":["Featured"],"articleSection":["News"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/ifintechworld.com\/?p=37188#respond"]}]},{"@type":"WebPage","@id":"https:\/\/ifintechworld.com\/?p=37188","url":"https:\/\/ifintechworld.com\/?p=37188","name":"Helping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate. | iFintechWorld","isPartOf":{"@id":"https:\/\/ifintechworld.com\/#website"},"datePublished":"2023-07-18T11:21:42+00:00","dateModified":"2023-07-18T11:21:44+00:00","description":"This article is reprinted by permission from NerdWallet.\u00a0 In a time when inflation is driving up the cost of nearly everything you buy, something else has","breadcrumb":{"@id":"https:\/\/ifintechworld.com\/?p=37188#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/ifintechworld.com\/?p=37188"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/ifintechworld.com\/?p=37188#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/ifintechworld.com\/"},{"@type":"ListItem","position":2,"name":"Helping consumers\u2014or pure profit for banks? The latest in the credit card late-fee debate."}]},{"@type":"WebSite","@id":"https:\/\/ifintechworld.com\/#website","url":"https:\/\/ifintechworld.com\/","name":"Repay Down","description":"Latest Personal Finance News, Tips and Updates","publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/ifintechworld.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/ifintechworld.com\/#organization","name":"Repay Down","url":"https:\/\/ifintechworld.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","width":558,"height":90,"caption":"Repay Down"},"image":{"@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61","name":"News Room","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","caption":"News Room"},"sameAs":["https:\/\/ifintechworld.com"],"url":"https:\/\/ifintechworld.com\/?author=1"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/37188","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=37188"}],"version-history":[{"count":1,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/37188\/revisions"}],"predecessor-version":[{"id":37190,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/37188\/revisions\/37190"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/media\/37189"}],"wp:attachment":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=37188"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=37188"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=37188"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}