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Credit card late payment and overlimit fees
Learn more about late payment and overlimit fees, as well as how to avoid them.
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When your credit card payment is late or you go over your available credit limit, you will more than likely be subject to a fee from your credit card company. To spend past your credit limit, you will need to consent to overlimit charges.
When you miss a payment on its due date, you will incur a late payment fee on your next billing statement, typically between $25 and $35. Late payment fees are very common and can directly affect your interest rates. The overlimit fee is generally $25 for the first offense and $35 for the second offense within six months. Your fee cannot be larger than the amount exceeding your credit limit.
How to avoid late payment and overlimit fees
Budgeting is a great strategy to help avoid these penalty fees as it allows you to keep track of your balance and set money aside to at least meet the minimum payment by the statement due date. In addition to establishing a budget, there are other specific strategies you can use to avoid these fees.
Overlimit fees
This is a fee that allows you the convenience to spend past your credit limit. However, many banks will not allow you to spend past your credit limit, so this fee may be nonexistent.
- Check your balance. Either plan your purchases so you don’t exceed your credit limit or make a payment between statement periods so you can avoid spending past your limit.
- Limit your spending. Manage your money and avoid going over your actual credit card limit by setting customized spending limits on your card. Some Internet and mobile banking apps also let you set spending limits per transaction.
Watch your spending
If you have a card with a credit limit of $5,000 and regularly spend $5,000 per month on your account, there is a high risk that you’ll go over your limit. To reduce the odds, consider a credit limit increase or pay for some of those expenses with a debit card instead.
Using a balance transfer to avoid overlimit fees
Late payments
If you don’t pay at least the minimum balance required by the due date, a fee could apply and you may then be charged for each billing period until a payment is made. Interest will accrue on both the original balance and the penalty charges.
- Autopayment. You can arrange an autopayment by logging into your online banking account and setting up a recurring withdrawal towards your credit card. You can also call your bank or complete and send in an autopayment form. Autopayments will become active after one statement cycle.
- Contact your provider. If you’re strapped for cash and the due date on your statement is approaching, you could call your credit card provider to explain the situation. In some cases, you may be able to get a one-time extension on your payment without fees or other penalties applying.
Budget to beat late payments
If money’s tight, budgeting can help you make at least the minimum monthly payment each month. If you had a $5,000 balance, a minimum payment of 2% would be $100 a month or $25 a week. If you know this, you can set aside this amount when you’re paid so you have enough for the payment by the due date on your statement.
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What else do I need to know to avoid late payment fees?
Most credit card providers have algorithms to determine when a late payment fee should be charged. But this could mean there are times when a fee applies even if you’ve paid more than the minimum amount for your statement period, as the case study below shows.
Case study: Late payment fee charges even after payments
Emilia has a credit card with a statement period that begins on the 1st of the month and ends on the 30th of the month, with her payments due on the 14th of the next month. She is at the start of her statement period for November and owes $0 on her card. Throughout the period, she makes the following transactions:
| Date | Description | Amount | Balance |
|---|---|---|---|
| November 1 | Payment for last statement | $1,000 | +$0 |
| November 8 | Flight booking | $800 | – $800 |
| November 14 | Payment towards balance | $800 | +$0 |
| November 20 | Electricity bill | $300 | – $300 |
Emilia doesn’t spend any more money for that statement period and is issued with a statement on the 30th of November. While she still owes $300, she has already made two payments for that statement period, so she decides to wait until her next payday on the 20th of December before paying any more.
Emilia finds that she has been charged a late payment fee of $20 because she had not made a payment after the due date on the statement period. As she is a loyal customer, the bank reverses this fee as a gesture of goodwill and now Emilia makes sure she always makes at least one of her payments after the due date on her statement to avoid further issues.
Spending over your credit limit by a couple of dollars isn’t going to cost much (if anything), but financial institutions will still charge when you miss a payment. Missing credit card payments can impact your chances of getting approved for other types of financial products such as a home or car loan.
Make the most out of features such as autopayments to make sure your payments are always on time.Back to top
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