# Credit card late fee: is it related to an actual expense? **URL:** \ **Category:** Factual Questions\ **Created:** [February 3, 2017, 9:40pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934 "2017-02-03T21:40:41Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Machine\_Elf](https://avatars.discourse-cdn.com/v4/letter/m/82dd89/32.png) [@Machine\_Elf](https://boards.straightdope.com/u/Machine_Elf)\ **Post date:** [February 3, 2017, 9:40pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/1 "2017-02-03T21:40:41Z")
I paid my last credit card bill a few days late because I misread the due date (time for some reading glasses). They charged me interest _and_ a late fee, the latter being 50% larger than the interest. (I don’t mind paying the interest - hey, I screwed up - but I called them up and asked them to remove the late fee, and they obliged.) So what’s the deal with the late fee? Is it related to any actual cost on their end incurred because I didn’t even pay the minimum payment? Or is it a pure-and-simple money grab, charging people an extra lump of cash (and getting away with it because most people will pay it uncontested)? ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [February 3, 2017, 9:44pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/2 "2017-02-03T21:44:29Z")
99% money grab, 1% having to add it to your bill. Now once you are more than one payment late, then the cost of collections and bad debts do add up. This is why some banks are going away from late penalties if you are less than 30 days late. ---
**Author:** ![ZipperJJ](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/zipperjj/32/211_2.png) [@ZipperJJ](https://boards.straightdope.com/u/ZipperJJ)\ **Post date:** [February 3, 2017, 9:46pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/3 "2017-02-03T21:46:51Z")
It’s a fixed fee that no doubt was spelled out in your original carduser agreement that you agreed to when you signed up. This is always and forever how credit cards work. The interest charge is different and is based on the unpaid balance by the date it’s due. If you have paid less than the balance by the due date, you will owe interest on the remainder, whether that remainder is 1% of the total balance or 100%. In your case it was 100%. They are two unrelated charges, really, other than they are assessed on the same day. If you’ve been a good customer up until now you can probably call and get the late fee reversed this one time. You will have to pay the interest, of course. ---
**Author:** ![Amateur\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/a/59ef9b/32.png) [@Amateur\_Barbarian](https://boards.straightdope.com/u/Amateur_Barbarian)\ **Post date:** [February 3, 2017, 9:48pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/4 "2017-02-03T21:48:28Z")
No. It’s a punishment/fee grab. Nothing more. You of course continue to pay daily interest on all balances, so the card company is losing nothing when you miss payments. ---
**Author:** ![ZurBob](https://avatars.discourse-cdn.com/v4/letter/z/71e660/32.png) [@ZurBob](https://boards.straightdope.com/u/ZurBob)\ **Post date:** [February 3, 2017, 10:20pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/5 "2017-02-03T22:20:24Z")
> [@Amateur\_Barbarian](#): > > No. It’s a punishment/fee grab. Nothing more. You of course continue to pay daily interest on all balances, so **the card company is losing nothing when you miss payments.** \ Actually, this is when they begin _ **making** _ their real money at appx. 25% per anum. ---
**Author:** ![bob\_2](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bob_2/32/3341_2.png) [@bob\_2](https://boards.straightdope.com/u/bob_2)\ **Post date:** [February 3, 2017, 11:38pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/6 "2017-02-03T23:38:57Z")
When I was late paying a few years ago I wasn’t charged a fee as such (I think it would be illegal here), but I had to pay interest right back to the invoice date. The bill comes out on the 5th but does not have to be paid until the 24th. If I pay on or before the 24th, I pay no interest; if I am one day late I pay some extortionate rate (1½% I think) on the full balance. ---
**Author:** ![ZurBob](https://avatars.discourse-cdn.com/v4/letter/z/71e660/32.png) [@ZurBob](https://boards.straightdope.com/u/ZurBob)\ **Post date:** [February 4, 2017, 12:40am UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/7 "2017-02-04T00:40:01Z")
> [@bob\_2](#): > > …I pay some extortionate rate (1½% I think) on the full balance. Really? Perhaps in G.B., but not in the U.S. … More like 25%:eek: ---
**Author:** ![watchwolf49](https://avatars.discourse-cdn.com/v4/letter/w/e9c0ed/32.png) [@watchwolf49](https://boards.straightdope.com/u/watchwolf49)\ **Post date:** [February 4, 2017, 1:04am UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/8 "2017-02-04T01:04:07Z")
Yeah … 1½% per month is 18% per year … fairly typical in the USA … Late Fees are pure profit for the credit card company … no overhead, no expense, just a little more ink on your billing statement … [ka’ching] … ---
**Author:** ![ZurBob](https://avatars.discourse-cdn.com/v4/letter/z/71e660/32.png) [@ZurBob](https://boards.straightdope.com/u/ZurBob)\ **Post date:** [February 4, 2017, 1:16am UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/9 "2017-02-04T01:16:06Z")
> [@watchwolf49](#): > > Yeah … 1½% per month is 18% per year … fairly typical in the USA … Yeah, 18% if one has _exceptional_ credit, much more with declining ratings. ---
**Author:** ![jtur88](https://avatars.discourse-cdn.com/v4/letter/j/e9c0ed/32.png) [@jtur88](https://boards.straightdope.com/u/jtur88)\ **Post date:** [February 4, 2017, 3:30am UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/10 "2017-02-04T03:30:28Z")
The late fee is their margin of profit. I’ve had my card for more than ten years, and have not paid one cent yet in any kinds of fees nor penalties. Perfectly free bill-paying and accounting service, and they even give me 1% cash back, travel interruption insurance, and collision waiver, and they go to bat for me if I protest a charge. Funded through the courtesy of card-holders who pay penalties. I do pay a bit of interest once in a while, if I have a big-ticket purchase, and it’s easier to pay the interest than to manipulate funds to get it paid by the due date. But normally, the entire balance due gets paid the minute I get the bill out of my mailbox. A couple of times I screwed up, and had a fee added, and I just phoned them and talked nice and civil to them, and they waived it and thanked me for calling. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [February 4, 2017, 4:46am UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/11 "2017-02-04T04:46:51Z")
> [@jtur88](#): > > The late fee is their margin of profit. I’ve had my card for more than ten years, and have not paid one cent yet in any kinds of fees nor penalties. Perfectly free bill-paying and accounting service, and they even give me 1% cash back, travel interruption insurance, and collision waiver, and they go to bat for me if I protest a charge. Funded through the courtesy of card-holders who pay penalties. > . Well, not quite. Yes the fees are gravy. But the meat is what they charge merchants for accepting them, usually around 3% of each purchase. ---
**Author:** ![ZurBob](https://avatars.discourse-cdn.com/v4/letter/z/71e660/32.png) [@ZurBob](https://boards.straightdope.com/u/ZurBob)\ **Post date:** [February 4, 2017, 8:30pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/12 "2017-02-04T20:30:37Z")
> [@DrDeth](#): > > Well, not quite. Yes the fees are gravy. But the meat is what they charge merchants for accepting them, usually around 3% of each purchase. A couple of merchants I regularly deal with have lately started tacking on a surcharge of 3% if paying with a card. I expect to see more of this as time goes by. It’s interesting the surcharge is applied to credit **and** debit cards. Hijack: Anyone know what fees, if any, for debit card purchases are charged to merchants? ---
**Author:** ![ftg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ftg/32/2801_2.png) [@ftg](https://boards.straightdope.com/u/ftg)\ **Post date:** [February 4, 2017, 8:43pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/13 "2017-02-04T20:43:25Z")
Bean counters like to find associations with things. People who do X are more likely to be involved in Y. Things like that. People who are routinely late might be associated with people who end up never paying off their CC. So you charge a fee now to make up for some of that loss later. But, as noted, this might actually lead to _more_ people failing to pay up so it could end up increasing losses. ---
**Author:** ![ZurBob](https://avatars.discourse-cdn.com/v4/letter/z/71e660/32.png) [@ZurBob](https://boards.straightdope.com/u/ZurBob)\ **Post date:** [February 4, 2017, 10:08pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/14 "2017-02-04T22:08:59Z")
> [@ftg](#): > > Bean counters like to find associations with things. People who do X are more likely to be involved in Y. Things like that. > > People who are routinely late might be associated with people who end up never paying off their CC. So you charge a fee now to make up for some of that loss later. > > But, as noted, this might actually lead to _more_ people failing to pay up so it could end up increasing losses. I’ve had CCs nearly since they’ve been offered (early 70’s). To my shame, I’ve paid innumerous late charges and tremendous interest on carrying charges for balances carried forward… Always have _eventually_ paid the accounts in full. It never crossed my mind to “never” pay off my card debts. Related to your post, what am I missing here? ---
**Author:** ![HowSoonIsThen](https://avatars.discourse-cdn.com/v4/letter/h/e56c9b/32.png) [@HowSoonIsThen](https://boards.straightdope.com/u/HowSoonIsThen)\ **Post date:** [February 4, 2017, 10:23pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/15 "2017-02-04T22:23:13Z")
> [@Machine\_Elf](#): > > I paid my last credit card bill a few days late because I misread the due date (time for some reading glasses). They charged me interest _and_ a late fee, the latter being 50% larger than the interest. (I don’t mind paying the interest - hey, I screwed up - but I called them up and asked them to remove the late fee, and they obliged.) > > So what’s the deal with the late fee? Is it related to any actual cost on their end incurred because I didn’t even pay the minimum payment? Or is it a pure-and-simple money grab, charging people an extra lump of cash (and getting away with it because most people will pay it uncontested)? Interest isn’t the same as a late fee. You get charged interest if you don’t pay off the full balance. You get charged a late fee if you don’t pay off the minimum amount due. So there isn’t a scenario where you would get charged a late fee and not be charged interest. I’m not sure what your issue is with the late fee. If they’re not going to charge a late fee, why even have a due date? ---
**Author:** ![race\_to\_the\_bottom](https://avatars.discourse-cdn.com/v4/letter/r/c4cdca/32.png) [@race\_to\_the\_bottom](https://boards.straightdope.com/u/race_to_the_bottom)\ **Post date:** [February 4, 2017, 10:48pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/16 "2017-02-04T22:48:08Z")
> [@ZurBob](#): > > A couple of merchants I regularly deal with have lately started tacking on a surcharge of 3% if paying with a card. I expect to see more of this as time goes by. It’s interesting the surcharge is applied to credit **and** debit cards. > > Hijack: Anyone know what fees, if any, for debit card purchases are charged to merchants? Interesting question. I patronize a market which will not take credit cards but takes debit cards. It is the only place I use it. A debit card simply deducts the purchase from a bank account. No credit is being extended by the bank. It is more like an electronic check. I seem to remember that your bank would impose a small fee, but I don’t know if that still happens. Somehow, Visa/Mastercard somehow get paid. Who pays? ---
**Author:** ![ZurBob](https://avatars.discourse-cdn.com/v4/letter/z/71e660/32.png) [@ZurBob](https://boards.straightdope.com/u/ZurBob)\ **Post date:** [February 4, 2017, 10:57pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/17 "2017-02-04T22:57:32Z")
> [@HowSoonIsThen](#): > > Interest isn’t the same as a late fee. You get charged interest if you don’t pay off the full balance. You get charged a late fee if you don’t pay off the minimum amount due. So there isn’t a scenario where you would get charged a late fee and not be charged interest. > > I’m not sure what your issue is with the late fee. If they’re not going to charge a late fee, why even have a due date? That there is a late fee is irrelevant based upon the fact that there is a due date. One doesn’t necessitate the other. Because the due date starts the ticker for interest on the balance due as an obvious moneymaker… I think the OP’s question asks if the late fee is simply a money grab, irrespective of the due date. ---
**Author:** ![jtur88](https://avatars.discourse-cdn.com/v4/letter/j/e9c0ed/32.png) [@jtur88](https://boards.straightdope.com/u/jtur88)\ **Post date:** [February 4, 2017, 10:59pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/18 "2017-02-04T22:59:55Z")
> [@HowSoonIsThen](#): > > I’m not sure what your issue is with the late fee. If they’re not going to charge a late fee, why even have a due date? I once had an electric utility that deducted a discount if paid by a “due date”. Comes out to the same thing. The rate is structured to allow for people who pay late, and you pay less if you don’t pay late. Aside, I had a neighbor who ran up a 5-figue CC balance, with no hope of stopping the dunning calls, so she filed for bankruptcy. She told her lawyer that she feit so guilty, welching on her promissory note. He said Don’t worry, you have already paid back everything you have ever borrowed, and all you owe now is years of accumulated fees and penalties and usurious interest gouging. (“And my fee”) ---
**Author:** ![ZurBob](https://avatars.discourse-cdn.com/v4/letter/z/71e660/32.png) [@ZurBob](https://boards.straightdope.com/u/ZurBob)\ **Post date:** [February 4, 2017, 11:10pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/19 "2017-02-04T23:10:48Z")
> [@race\_to\_the\_bottom](#): > > Interesting question. I patronize a market which will not take credit cards but takes debit cards. It is the only place I use it. A debit card simply deducts the purchase from a bank account. No credit is being extended by the bank. It is more like an electronic check. I seem to remember that your bank would impose a small fee, but I don’t know if that still happens. Somehow, Visa/Mastercard somehow get paid. Who pays? To further confuse the question: When using my debit card, I’m always given the option of selecting debit **OR** _credit_… Out of curiosity, I sometimes select credit, and the transaction is always approved/processed.😕 ---
**Author:** ![bob\_2](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bob_2/32/3341_2.png) [@bob\_2](https://boards.straightdope.com/u/bob_2)\ **Post date:** [February 4, 2017, 11:23pm UTC](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934/20 "2017-02-04T23:23:27Z")
I have three credit cards and pay no fees or interest whatsoever. Paying by credit card gives me some protection, especially when buying online, and I also get 20 days actual credit between the date of the bill and the due date for payment. Between the three cards, I have over £20,000 worth of credit available. This obviously costs Mastercard and Visa something and they obviously get some of that cost back from the retailer, but some of the costs must also be paid by the less fortunate, or the les financially aware, who pay late and run up debt, which means they have to pay interest and penalties. My daughter recently bought a car and paid a large part of the cost on a card with 18 month’s free credit. It’s not really free, because there is a 3% charge, but the cheapest personal loan she could get was 7½% so that was a good deal. If she fails to pay the debt off by the due date the balance will cost her 29%. Obviously they expect a reasonable number of their customers to fail to pay up in time. They really should teach this stuff in school. [Next page](https://boards.straightdope.com/t/credit-card-late-fee-is-it-related-to-an-actual-expense/778934.md?page=2)