Consumer Payment Card News

Penta Whammy

Make a late credit card payment and you get whacked! – BIG TIME! You’ll get hit five ways: incur late and over-limit fees; trigger a higher interest rate; generate a negative report to the credit bureaus; have the credit line reduced and lose new and accumulated rewards. The $39 typical late payment fee is a nuisance for some and a disaster for others. But, it is the tip of the iceberg. Having your interest rate jacked up from 15% to 30% is devastating for just about everyone. If you are near the credit limit, the extra interest charges and late fee can also trigger over-limit fees ($35 average). Adding salt to the wound is the embarrassment at the point of sale, that your credit limit has been reduced. Most cardholders do not realize that your can have your participation in a rewards program canceled if you default on the credit card agreement. In some cases this means all the points you have accumulated can vanish. A few issuers will offer a reinstatement option for a fee, only if your account becomes current. For others, kiss the rewards away. If you are enrolled in a rewards program it is best if the points are held by a third party, not the card issuer. For example, airline rewards programs may be linked to a credit card but are redeemed and managed by the airline. While the card issuer might cancel miles earned during the latest billing cycle, they generally recall miles earned in prior cycles. Bottom line – pay credit cards on time and if you mess up contact the issuer an offer a good excuse for the oversight.

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