You may soon see 'big hikes' to credit card late fees, warns consumer watchdog. Here's how to avoid paying them

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Key Points
  • American consumers pay $12 billion per year in credit card late fees, according to the Consumer Financial Protection Bureau.
  • Some 90% of cardholders who asked for a late fee waiver got at least some of their money back, according to a recent survey from WalletHub.

If you've gotten dinged with a fee for making a late credit card payment, you're far from alone. Such fees cost American consumers some $12 billion per year, according to the Consumer Financial Protection Bureau.

The consumer watchdog recently announced it would be keeping its eye on credit card issuers to make sure that number doesn't bounce upward. The current set of rules governing these fees mean that issuers can charge you up to $30 for your first late payment and $41 for a subsequent late payment within 6 billing cycles, without rankling regulators.

The CFPB is worried that, if left unchecked, those numbers may be headed upward, hence the investigation. "This effort is particularly timely since current rules might give companies the incentive to impose big hikes based on inflation," said CFPB director Rohit Chopra in a statement.

The timing and source of the investigation doesn't make sense to everybody.

"I find the whole thing a little odd given that the CFPB regulates credit card fees," says Ted Rossman, senior industry analyst at Bankrate, a sentiment that industry groups echoed in statements to CNBC. "They're looking into other things like overdraft fees and buy now pay later, so maybe it's a continuation of that. Late fees are more easily avoided, though. Not to be flippant about it, but the answer is don't pay late."

Here's how he says you can avoid paying late fees, whether they rise or not, and what to do if you find yourself in the position of having to pay them.

How to avoid credit card late fees

No one wants to pay late, but even the most fastidious folks occasionally get up to get a glass of water at 2 a.m. and realize, whoops — I forgot to pay off my card yesterday.

If you want to avoid forking over some cash every time you're a little forgetful, you may have to strategize. If deadlines definitely aren't for you, period, you may have to start from the very beginning by signing up for one of the several cards available on the market that don't charge late fees.

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Beyond that, you'll have to take steps to make sure you pay on time. One option is to set up automatic payments, "but that's not always great when it comes to credit cards," Rossman notes. That's because your balance is likely to vary from month to month, meaning you'll have to keep a close eye on things if you're automatically paying off your entire balance.

Rossman recalls a story from a friend who had autopay set up on a card he rarely used only to find that identity thieves had charged $1,500 on it. "He didn't realize for a bit that he had autopaid that charge," Rossman says. "It ended up being a huge problem to unwind."

A solution that doesn't involve cash changing hands: Setting up alerts, either via calendar reminders or through your credit card issuer to tell you when your payment date is approaching. If you're the kind of person who regularly snoozes their alarms or who ignores corporate emails or texts, though, you may soon turn a blind eye to these.

A happy medium, offers Rossman, is setting your credit card account to automatically make the minimum payment each month. "That way, you guarantee that you won't miss your payment. You can kind of set that as a floor for yourself," he says. "Then you can manually log in and pay the whole amount."

What to do if you're charged a late fee

If you handle your credit card payments online, you could be charged a late fee the second your payment is past due. But don't worry — it's not the end of the world.

For one thing, if you get on top of your payments soon, you likely won't see any issues with your credit score. "For your credit score to be affected, the threshold is 30 days late," says Rossman. "Paying 60 days late will cause even more damage."

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But even if you pay the next day and your credit score isn't dinged, who wants to be out $30 or more?

Even credit card companies know the answer is no one. So once you make your payment, give your card issuer a call. Some 90% of cardholders who asked for a late fee waiver have gotten at least some of their money back, according to a recent survey from WalletHub.

"Even if the card issuer doesn't have a blanket policy, a lot of times it's a sort of unwritten policy," says Rossman. "If it happens once in a while, and you're a good customer, they'll waive it for you."

That doesn't mean that you can pay whenever you want and magically erase all your fees by calling each time you're late, though, he cautions. "Don't abuse it. If you're late every month it's not going to work."

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