Credit cards make a lot of their profit from fees and penalties leveled against their members. Late fees, over-limit penalties, and other sundry charges are of critical importance to the credit card companies.
As part of their tactics to squeeze more money out of members in the form of penalties, credit card companies will deliberately take their time in processing your payments to them in the hopes that by stalling your payment they can slap you with a late fee.
The credit crisis and late fees
The current economic crisis has wrought havoc on the credit card companies. Liquidity has dried up everywhere, and they just don’t want to lend anyone any more money. In response to this credit crunch, the credit card companies are slashing people’s credit lines — and the people who are taking the cuts are those with the best payment records.
Why? Because people with perfect or almost perfect payment records don’t generate any profits for the credit card companies through late fees. People who make a lot of late payments and hence accrue a lot of late fees — pure profit for the credit card companies — are the customers they’re going to want to keep on.
Avoid fees and pay early
In order to avoid paying late fees, don’t look at your due date as seen on your online account. You don’t have that much time to pay the monthly bill.
So, if your payment is due on the 17th of the month, for example, you can’t make the electronic payment on the 17th, because it will take a few days to process, and you’ll get hit with a late penalty even though you made the payment on the day it was due.
Many credit cards will seek to make money off of this by offering expedited payment so that you don’t get a late fee — but there’s an expedited payment fee that could easily match the late fee anyway. So pay your monthly bill at least a week before it’s actually due and you will avoid the late fees.