Credit cards come with a range of fees that apply in specific circumstances, including when your payment is late or if you go over your available credit limit. Following government reforms, there have also been some changes to these penalty fees.
For example, most financial institutions have removed overlimit fees for credit cards opened after 2012. Although it is possible to spend past your credit limit, for example $10 or $20, you will usually need to consent to overlimit charges if you want to be able to spend past this amount. Late payment fees, on the other hand, are still very common.
If you miss a credit card payment, this may be listed on your credit report and can hurt your credit score. If you've missed a payment, you can get a free copy of your credit report through Finder and see if it has had an impact on your credit score.
How to avoid late payment and overlimit fees
Budgeting is a key factor in avoiding these types of penalty fees as it allows you to keep track of your balance and can help make sure you have enough money set aside to at least meet the minimum payment by the statement due date. You can use our free budget planner to get a comprehensive overview of your finances in just a few minutes, or work one out based on your spending and income.
As well as establishing a budget, there are other specific strategies you can use to avoid these fees. We’ve broken them down below.
Overlimit fees
Overlimit fees have been removed by most banks following the 2012 government reforms. But if you applied for your credit card before mid-2012, and you exceed your credit limit, your financial institution may charge you an overlimit fee.
If you’ve recently opened a credit card account, your bank may not charge you an overlimit fee and may not allow you to spend past your credit limit. You can consent to spending past your credit limit, but in doing so you’re also consenting to overlimit charges.
- Overlimit example. 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, you could consider a credit limit increase or pay for some of those expenses with a debit card instead.
- Check your balance. If your financial institution does charge overlimit fees, you can download your bank’s mobile banking application, log into Internet banking or call your provider to stay informed about your remaining credit. 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. Some credit cards allow you to set customised spending limits. For example, CommBank’s Internet and mobile banking apps let you set spending limits per transaction. This can help you manage your money and avoid going over your actual credit card limit.
Late payments
If you don’t pay at least the minimum required by the due date on your statement, this fee could apply. It may then be charged for each subsequent statement until a payment is made. If this happens, interest will accrue on both the original balance and the penalty charges. You can set up auto-payments so you never miss a credit card repayment. And if money’s tight, budgeting can help you make at least the minimum monthly repayment each month.
- Late payment example. You need to budget for at least the minimum payment on your card. So if you had a $5,000 balance, a minimum payment of 2% would be $100 a month or $20 a week. If you know this, you can set aside this amount when you’re paid so you have enough to meet the repayment requirements by the due date on your statement.
- Autopayments. Autopayments allow you to pay the minimum amount due each month, the entire outstanding balance or a partial amount of your account’s closing balance from a nominated transaction account. You can arrange an autopayment to your credit card by logging into your online banking facility and completing an online autopayment form. Alternatively you can call your financial institution 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 looming, you could call your credit card provider to explain the situation. In some cases, you may be able to get a one-off extension on your payment without fees or other penalties applying.
What else do I need to know to avoid late payment fees?
Most credit card providers use software 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.
Late payment fee charges after repayments
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 has $0 owing on her card. Throughout the period, she makes the following transactions:
| Date | Description | Amount | Balance |
| 1st November | Payment for last statement | $1,000 | +$0 |
| 8th November | Flight booking | $800 | – $800 |
| 15th November | Payment towards balance | $800 | +$0 |
| 20th November | 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.
When Emilia logs on to her account on the 20th, she finds that she has been charged a late payment fee of $20. She calls the bank and is told that the fee has been charged because she had not made a payment after the due date on the statement period. As she is a loyal customer and thought she was doing the right thing by making two payments during November, the bank reverses this fee as a gesture of goodwill. From then on, Emilia makes sure she always makes at least one of her payments after the due date on her statement to avoid further issues.
How to plan your budget
Spending over your credit limit by a couple of dollars isn’t going to cost you, but financial institutions will still charge when you miss a payment. What’s more, missing credit card payments can impact your chances of getting approved for other types of finance such as a home loan or a car loan. Make the most of smart credit card features such as autopayments to make sure your repayments are always on time.
Pictures: Shutterstock
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NOTE on the NAB fees – payments on your credit card are only accepted between the statement issue date and the due date. Any payments made outside this narrow date range are not counted toward your minimum monthly payment!! In my case I am paid fortnightly, which of course does not correspond to any particular monthly date, and I pay roughly half the due amount then. Consequently the NAB will charge me a “late fee” although I have paid more than the monthly fee requested!! So much for “a fairer banking system with more give and less take”!!!