Credit Card Penalty Fees

Credit cards are tools that should be handled with the upmost respect. Like most tools, credit cards are useful, but come with many associated dangers. Tough, new credit card policies penalties can seriously impact unsuspecting consumers. Make one mistake in an absent minded moment, and the bank will nail you with late fees, over-the-limit fees, and penalty interest rates that are extremely harmful to pocketbooks and credit reports.

The country's credit card companies continually search for ways to boost profits. One easy way to expand profits without scaring customers is to quietly raise late fees. Specifically, for companies like Citibank and Discover, any customer with debt totaling $1,000 or more who skips a payment is stuck with a $35 penalty. If your balance is less than $1,000 but greater than $100 the fee is dropped to a mere $25. Although many companies have a tiered-penalty system similar to the example above, each company has a different policy inscribed in the fine print. For example, some companies are indifferent to your remaining balance and nail you with a $35 fee under any circumstance. Knowing the details of your credit card cannot be stressed enough.

If keeping tabs on the cost of late fees is annoying, consider that credit card companies are also coming at you with unpleasant over-the-limit fees that penalize you for exceeding your credit limit. Like the late fees already mentioned, most companies have a graduated fee system which places the heaviest penalties on those with the most debt. Typically the fee tops off at $35, however this is a generalization that could vary from your specific situation. Even if you have never exceeded your credit limit, beware. Credit card companies can adjust your credit limit downward without notice. Some credit card companies have lowered customers' credit limits to an amount below their current balances and then hit them with over-the-limit penalties.

These fees may seem minor when compared to your overall debt, however their significance cannot be overlooked. Credit card companies are banking on the fact that you will probably consider these fees too small to fret over. And according to their earnings in recent years, they guessed correctly. According to California-based R.K. Hammer Investment Bankers, 33% of all credit card company profits in 2002 were the result of fees. Moreover, penalty fees accounted for one-quarter of that 33%.

Spending a few minutes reviewing your policy is time well spent. Devoting a scant 10 minutes to thoroughly read and understand your policy could save you hundreds of dollars, while nudging you closer to a debt free financial life. Skimming over your statements and ignoring your terms is a great way to lose money and get burned.

Ideally you should know the terms and conditions well enough to recite them in your sleep. But knowing policies and avoiding fees are completely different issues. Making timely payments and staying within your credit limit will keep you out of trouble most of the time. However, you still need to read your statements carefully and be aware of fees. Knowing the terms and avoiding mistakes are both key to debt free living. Is your debt problem pushing you closer to bankruptcy? Have you tried all the possible alternatives? Debt settlement can help you become debt free without filing bankruptcy. Go through the free counseling offered by Debt Consolidation Care and eliminate your debt problem.