It is no secret that credit companies and banks get most of their profit from interest, fees and penalty charges. As for penalty charges, they may amount to millions of dollars per month, as even minor mistakes cost customers dear. Now that the credit industry is having hard times, fees and penalties are becoming stricter. While companies suffer great losses because of rising delinquencies, regular customers see higher fees and higher penalties on their accounts. Here's a look at the most commonly credit penalties and the ways to avoid them.
Perhaps, the best way to understand how this system works is to look at the situation with lenders' eyes. Just like any other business, a credit company aims at maximizing its profit and minimizing its costs. When granting credit, the company expects a borrower to stay within stipulated credit limits and pay credit bills on time.
At first glance, it's not that difficult. But we all have busy days and late payments can occur out of the blue. Late payment charges may vary from company to company, but generally they're somewhere between $ 15 and $ 39. These fees are not the only penalty associated with late payments. You should not forget about default interest rates that will apply soon after your late payment. If you carry low APR credit cards, you may forget about those low rates after being late with your payments. And in case your balance is quite massive, it can be extremely tough to pay it off with a new rate. The solution in this situation can be balance transfer credit card applications that enable borrowers to move a heavy balance and pay it off on low rates. But be sure your score rating is high enough, as the best balance transfer cards are available for those with excellent or good credit.
Beside default rates and late payment fees, late payments can negatively affect your credit rating. The major credit reporting agencies will be sure notified about it if you are more than 30 days late with your payment. Sad to say but this entry will be promptly added to your credit profile and it may stay there for as long as seven years. Needless to say what consequences it may have, especially for those people who plan to apply for a new card in future.
Anyways, you can avoid the problems associated with credit penalies. The vast majority of lenders allow card holders to move their due dates or link their checking account with a credit account. All the more, some issuers provide credit card offers that award customers for being on time with their payments. In case you have already made a late payment, contact your issuer immediately and explain the situation. The cases are not rare when companies waive late fees. Again, it depends on your circumstances. The company may or may not meet you half way.
All in all, it's in your hands to speed up the process of paying your bills. The most convenient way is to use online services. There are plenty of companies offering such services to their customers. If you are not that well-organized, you may take advantage of e-mail, mobile phone reminders or payment schedules. Plus, you may link your checking account with your credit account to gain peace of mind that all your payments will be made automatically.