Late Fee

Lenders and service providers charge late fees to cover the cost and risk of late payment and to encourage borrowers to pay on time. The fee might be a fixed amount, such as 25, or a percentage of the overdue amount.

A late fee is usually not the only cost. A missed payment may also lead to extra interest, the loss of promotional interest rates and, after a certain number of days, a negative mark on your credit report. That mark can make future borrowing more expensive for years.

For example, missing a credit card payment might cost a 30 fee immediately, and if the card had a 0% promotional rate, the rate could jump to the standard rate of 20% or more on the whole balance.

Setting up automatic payments for at least the minimum amount, keeping reminders and choosing due dates that fit your pay date are simple ways to avoid late fees. If you know a payment will be late, contacting the lender early can sometimes lead to the fee being reduced or waived.