Tips, News and Advice from Credit Card Assist

How to Avoid Unreasonable Penalties on Your Cards

by kathryn on June 11, 2008

Have you ever stopped to think about how credit card companies make their money? They do so primarily through two different methods. The first is that they charge interest rates that allow them to profit off of the money that they have loaned to you via credit. The second is that they charge you penalties and fees for not following their rules. This serves a double benefit to the credit card company because they get the fee from you in the short term plus they get to raise your interest rate and make more money off of you in the long run. In order to keep your money in your own pocket instead of paying fees that raise the profits for credit card companies, you need to be an organized and smart credit card user. The first thing that you need to do to avoid unreasonable penalties is to make sure that you completely understand all of the fees and penalties that are associated with your credit cards.

This information is provided to you by your credit card company and should be read through carefully. The two most common fees that people get dinged by are late fees and over-limit fees. Understanding these fees better will help you avoid having to pay them.

The most common fee that gets people is the late fee. Sometimes you just forget to send a check to the credit card company. Sometimes you fail to make the payment on time because you didn’t get your income check early enough to send the payment. Whatever the reason, you’ve paid late and the credit card company is going to charge you for it. They’ll make you pay a fee on your next statement and they’ll probably penalize you with a higher interest rate. To avoid this, you need to always make on-time payments.

To make on-time payments, you should set your bank account to automatically send your payments for you. Make sure that you schedule them to send well in advance of when the actual payment is due. For example, if your payments are due on the 15th, schedule them to send on the 5th of each month. If the problem is actually that you don’t have the money because your checks aren’t coming in with enough time to send the payment, you should call the company and ask to change the date payments are due. If you get paid on the 15th of every month, re-schedule your credit card payments so they aren’t due until the end of the month. This way, you’ll have plenty of time to avoid late fees.

If late fees aren’t your problem then your problem is probably the over-limit fee since that’s the second most common fee credit cards will get you on. The worst is the double whammy; you’re really close to your credit limit and then you make a late payment and the late fee puts you over the limit so you’re also charged an over-limit fee. There are two things you need to do to avoid the over-limit fee. The first is to know the limits on all of your cards. The second is to make sure that your balances are at least $100 lower than the limit at all times, no matter what. Being aware of the fees and actively avoiding them will make it so that credit card companies can’t penalize you.

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