Credit card companies claim the amount of interest and fees they charge are based on the level of risk they take when extending credit to an individual. Risk is determined by an individual’s credit history and credit score. According to a study conducted by the Center for Responsible Lending, late fees applied by credit card companies seem to have more to do with the card issuer itself than a cardholders risk of defaulting.
The study showed there are generally two factors that impact the amount of late fees charged by a credit card issuer: the type of credit card issuer and the level of aggressiveness the company uses.
Type of Credit Card Issuer: The study indicates that the type of institution extending credit plays a large role in the amount charged for late fees. Credit union late fees are generally about half the amount charged by banks, with credit unions charging $20 for a late payment compared to a standard credit cards’ $39 late fee.
Aggressiveness Level of Company: the most aggressive credit card lenders charge higher late fees than less-aggressive lenders. If a bank is sending you notice after notice about their promotional offers are the same credit card issuers that will charge the highest late fees and use more aggressive collection practices.
Choosing a Credit Card
If you’re looking for a credit card but want to avoid high late fees in the event you make a payment late every now and then, you’ll want to take a look at how the credit card issuer you’re considering solicits customers. The more aggressive they are, the more likely they are to charge excessive late fees. Compare the credit card policies of various cards before choosing a card.
