How To Avoid Unreasonable Penalties
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
How to Avoid Unreasonable Penalties
Summary
Carrying a large balance on your credit cards can negatively affect your credit score and cost you in interest payments. Now, there’s another reason to avoid it: late payment penalties may be linked to the amount you owe.
Credit card companies profit from fees, penalties, and interest, but penalties can be particularly harsh. For example, a $39 late fee could be applied to balances over $1,000 if you’re just two days late.
Understanding Credit Card Penalties
With stricter fees and penalties, largely due to the mortgage crisis and subsequent financial losses, credit card companies have ramped up their charges.
Examples from Top Card Issuers
- Discover:
- Late fee: $15 for balances up to $100, $25 for $100-$1,000, and $35 for over $1,000.
- Over-the-limit fee: Same as the late fee.
- Citibank:
- Late fee: $15 for up to $100, $25 for $100-$1,000, and $35 for over $1,000.
- Over-the-limit fee: $35.
- Bank of America:
- Late fee: $19 for less than $100, $29 for $100-$1,000, and $39 for over $1,000.
- Over-the-limit fee: $35.
- Bank of America’s American Express card charges 25% interest on cash advances, meaning most payments go to fees and interest, not the principal balance.
Protecting Yourself from High Fees
1. Do Your Research:
- Choose cards with reasonable terms. Use resources like Creditor Web to compare options.
2. Consider Balance Transfer Cards:
- If a lower interest rate would help you pay off a large balance in six to twelve months, look into 0% interest balance transfer cards. Be cautious, as these cards will accrue interest after the introductory period.
3. Seek Advice:
- Talk to friends and family about their experiences. Stay informed about credit card news and learn negotiation techniques for better terms.
Armed with knowledge and strategic choices, you can avoid unreasonable fees and penalties while making informed decisions about your credit cards.
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