No Late Fee Credit Cards: Are They Right For You?

If you’ve ever made a late payment to your credit card company, you know how expensive overlooking that due date can be. In response to consumer complaints, some credit issuers are offering cards where you won’t be charged a fee for paying late. However, as good as these “no late fee” cards can sound, there is, of course, a catch.

Interest rate increase
While you won’t be charged a late fee for missing a payment due date, the interest rate you have on that card can increase, and most often dramatically. How high can it go? Extremely high: typically in the 25-29 percent range. So while late fees are certainly expensive (usually between $15-$35), they can be a bargain when compared to the elevated interest rates on large revolving balances.

Credit damage
Just because you won’t be assessed a late fee doesn’t mean you won’t suffer other repercussions if you don’t pay on time. If you are late on your payment 30 days or more, you will still get dinged with a negative notation on your credit report.

More expensive
In general, “no late fee” cards have interest rates that are slightly higher than credit cards that do charge a fee if you pay late. Some credit card issuers are even eliminating fees for cash advances, balance transfers, or exceeding the credit limit. However, the fewer fees the creditor charges, the higher the interest rate tends to be.

If you really don’t want to pay high finance charges, become a savvy and responsible credit card user. Always pay on time and keep your balances low. Shop around for a consumer-friendly card – one that charges a low interest rate, has a long grace period, and is generally willing to work with you if you must make a late payment.

Revised January 2016.

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