Thursday, September 20, 2007

Don't like late fees? Try paying your bill

Are you upset that credit card late fees are staggering and out of control? I'm not. Sure, I've carried a balance in the past. I even had some significant credit card debt. But I've never paid a late fee. Why? Because I pay my bills.

Right now, the late fee on a Discover card is $15 on balances up to $500 and $39 on balances over $500. For billing periods after Oct. 1, the late fee will be $19 on balances up to $250 and $39 on balances over $250.
I understand that late fees for these cards are pure profit for these companies and they are ridiculously high, but you only get charged when you don't pay on time. With all the buzz surrounding these fees there has to be a huge number of people paying their bills late.
That’s a real stiff penalty to pay for being as little as one day late...when consumers mail in their payment seven to 10 days in advance and they still get hit with a late fee, something is really wrong.
The problem here is that there is no way to verify when your bill arrived. Yes, I have sent letters out first class that took over a week to arrive. It is somewhat unrealistic also to believe that when you send your payment via regular mail that it will be processed on the same day that the company receives it. Though large, these companies probably have many thousands of bills arriving per worker employed to process them each day. If your bill lands in someone's box at 3PM when they have a pile of payments waiting to be processed, it makes sense that it wouldn't be posted the next day. Do I think it's right? No. Do I think consumers can protect themselves fairly easily? Yes! Direct electronic bill payments are the only way to send a secure payment and have a receipt of that payment. Your alternative is to send everything by certified/receipt request mail, which of course costs quite a bit more.
How would you describe an interest rate of 28 percent to borrow money through your credit card
Why on Earth are you borrowing cash from your credit card? Further, the rates they charge are clearly listed on each bill that arrives in the mail. If you don't like paying 28% interest to borrow cash, don't do it. It's that easy.

Rather than blame the credit card industry for their crooked ways, take control. Want to avoid late fees? Pay the bill. Want to avoid high interest charges? Don't use the credit card. Don't want to pay 30% to borrow cash? Don't borrow cash. Stop feeding the beast. The only ones who can stop this madness is us: the consumer. Otherwise we are left to the regulation of the government. Like a parent disciplining a young child, it will only behave when mommy and daddy are watching (or when they think they'll get caught). And who do you think pays for that strict regulation? Is it free? No. You pay for it. Taxes.

This one nearly killed me:
If you do not have any liquid assets, consider tapping the equity in your house, through a home equity line of credit. This really makes sense if you already have an established line of credit.
What an idiotic suggestion. You are going to eat away the equity of your home and risk losing it in order to get cash? That isn't the solution. The solution is to stop borrowing money. How many of these people facing foreclosures (and crying fowl) can't refinance or sell because the value dipped below what they borrowed? How many are because people sank their other debts into home equity loans? You have a spending problem. You have a living-outside-your-lifestyle problem. Borrowing money is only going to make things worse and extend your misery because, sooner or later, you are going to have to repay it. What makes you think your situation will be any better then? You'll just have to borrow more, and extend it further. See where this is going? See where the perpetual cycle of debt leads? Utter dependency on an industry designed purely to efficiently bring more money in than it sends out.

This is a scam, perpetuated by rampant consumerism to feed off the ignorant. There is only one way to use a credit card and if you are paying late fees and interest charges, you aren't using it correctly. Government regulation is not the answer. Consumers educating themselves and making wise financial decisions are the only things that will bring the beast down.

1 comment:

Jim said...

Not all bank fees are caused by being irresponsible or incompetent, there can be outside factors involved. I recently ran into a situation where Wells Fargo did not receive my payment. Needless to say this became late and I got charged a fee. They can see my payment history is perfect and every other payment displays. As far as I knew I paid the bill by writing out the check, putting the slip and check in their envelope, stuck a stamp on it, and mailed it through USPS. When I called them up two weeks later noticing the check wasn't cashed, they never got it. I have no way to control the factors between myself mailing the check to them, and them receiving it.

This is where I like doing electronic draft and online payment systems. There is no check involved anymore because the transaction happens right away without a delay. Not every place offers this type of system yet so I still have regular checks to pay those bills. One day I guess I won't have to be concerned about checks or the mail because there won't be a need to use them.