Avoid credit card late fees

For years I have used a simple but effective trick for avoiding credit card late fees. But in all the financial advice I have read, I have never seen this mentioned, so I'll explain it here in hopes that it may help someone else.

But first, if you are terminally irresponsible when it comes to money you will probably find a way to mess this up too. This advice is meant for those who are generally good money managers, don't bounce checks, pay more than the minimum amount due on their credit cards, and usually remember to pay their credit card bills on time - but live in fear of accidentally missing a payment and getting hit with a late fee and possibly an increased interest rate.

All you need is a bill payment service that allows you to make automatic recurring payments from your checking account. Most banks offer this service - often for free - and chances are good that you are already using a service like this to pay your bills.

Simply check a few recent credit card statements to see what your usual minimum monthly payment is. Then set up your automatic bill-pay service to pay a bit more than this to the credit card company every month about halfway through the billing cycle. Be sure to set this up as a recurring monthly payment - not a one-time payment. And set the amount high enough to cover the minimum payment even if it goes up a little.

That's all there is to it. Your minimum payment will be made every month automatically even if you forget. So if the credit card bill gets lost or delayed in the mail (or in that pile of papers on your desk) you may have to pay a bit more interest next month but at least you won't have a late payment on your record or have to pay late fees or increased interest rates.

What do you do when your next credit card statement arrives? If you only pay the minimum every month, you don't have to do anything - it will be paid automatically. Or if you are a smart money manager and pay your credit cards off in full every month, simply pay the remaining balance on the card as you normally would. Always check your statement to be sure that your minimum credit card payment has not increased to more than your scheduled monthly payment. And be sure that you keep enough in your checking account to cover the automatic payment.

Greg