Persistence pays off in battling credit card fees

John W. Schoen • Profile • E-mail

Like a lot of credit card holders, Kelly in Pennsylvania was tired of getting dinged with late fees, especially when she felt sure she paid her bill on time. But unlike many, she stuck to her guns. Meanwhile, Peter in Texas is trying to start a small business — from scratch.

Is there anyway to get around paying a late fee when the check was sent in plenty of time but the credit card company is claiming they received it late? I am questioning this because it happened two months in a row, and they will only drop one fee. Other than the last fee the card is totally paid off.
—Kelly H., West Mifflin, Pa.

Among the long list of fees charged by banks and credit card companies, this may be one of the hardest to beat. Many banks and card issuers include language in the agreement you sign that they can charge fees of $30 or more — or raise your interest rate to as much as 31 percent — if you’re so much as a day late making a minimum payment on your due date.

Some banks and card issuers will even boost your rate if you’re late on another bill — an industry practice known as “universal default.” The theory is that is you miss paying another bill (even if you’re disputing that charge), you’ve somehow become a riskier borrower.

In some cases, these agreements say they have the right to raise your rate “at any time for any reason.” Your only remedy is to pay off the card in full and cancel your account.

Fees have become a huge money-maker for credit card issuers. Late fees now average $34 per month; “over-limit fees” — that’s when you spend more than your credit limit — average $31 per month, according to a recent report by the Government Accountability Office.

After hearing loud complaints from consumers about these practices, Congress has begun holding hearings on the credit card industry and is looking into curbing the most abusive practices.

“The disclosures on calculating interest rates are so complicated that virtually no average consumer can understand them,” Sen. Carl Levin, D-Mich., said at a recent hearing. “In some cases, consumers become overwhelmed with penalty interest charges that can double or triple the size of their debt, and make it nearly impossible for them to pay their bills.”

Levin cited a case in which a card holder overspent his limit three times for a total of $200 and was charged over-limit fees 47 times amounting to $1,500.

The hearings haven’t yet produced new rules for card issuers. Still, they seem to having some impact; Citigroup and Chase — two of the biggest card issuers – recently dropped some of their most punitive practices and said they were reviewing fees and disclosure policies.

But late fees will probably be the last to go. The reason these are so difficult to dispute is that unless you make an electronic transfer or pay by phone, which may generate another fee, you have to prove when the card company received your check in the mail.

On place to start is your canceled check — which should have a stamp on the back indicating when the funds cleared. The schedule for check clearing is complicated and depends on a variety of factors: what bank it’s drawn on, whether it was in-state or out-of-state, etc. But if the check cleared before your due date, your card company will have a hard time arguing that you paid late.

You still have to challenge the late fee, and if the card issuer has logged it as late, you probably won’t get much relief from the front-line customer service representative. The best way to resolve these disputes is by asking to speak to a manager, explain that you believe you paid on time, and making it clear that you’ve been a good customer and will take your business elsewhere if you’re not satisfied.

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