DEFINITION of 'Late Fee'

A late fee is a charge a consumer pays for making a required minimum payment on a credit card after the due date. Late fees encourage consumers to pay on time and may vary, though some are typically $25 for the first late payment and $35 for subsequent late payments. Some credit card issuers will waive the late fee the first time a consumer misses the minimum payment deadline; other credit card issuers do not charge any late fees at all, but only issue cards to consumers with very good to excellent credit – consumers who are unlikely to ever pay late. Still other cards offer no leniency and will charge a late fee even if cardholder barely miss the payment deadline.


It is recommended to pay a credit card bill in full and on time each month, but if a cardholder cannot pay it in full, making at least the minimum payment on time means they can avoid being charged a late fee. If the cardholder does not have enough money in their checking account to cover the credit card payment, not only will the payment still be classified as late, the cardholder will also likely incur a returned payment fee from the credit card issuer and an insufficient funds fee from the bank.

Ways Late Fees Can Increase Outstanding Balances

Late fees may be incurred on other types of accounts if payment is not received by its due date. Insurance payments, rental fees, and other structured payments that follow a schedule may be subject to late fees if the due date is missed. The penalty may be increased as more time passes between the date the payment was expected and when it was finally received. Late fees may be rolled into the outstanding balance and then become subject interest, further compounding the borrower owes.

If a cardholder is late making the minimum credit card payment, in addition to paying a late fee, they will also have to pay interest. The account may also be subject to penalty repricing, meaning the interest rate will increase to the penalty APR because the credit card issuer considers them a higher credit risk. Making a late payment might be a simple oversight, but it might be a sign of financial trouble.

Late fees are one of several fees credit card companies charge consumers in order to make money. Credit card consumers are also subject to annual fees, balance transfer fees, foreign transaction fees and returned payment fees. All of these fees are avoidable, however, if the cardholder carefully selects the credit card, follows the terms, and avoids behaviors that trigger such fees.

  1. Returned Payment Fee

    A returned payment fee is a charge a credit card company may ...
  2. Universal Default

    Universal default allows a credit card company to raise a card’s ...
  3. Credit Card Funding

    Credit card funding is the use of a credit card account to provide ...
  4. Inactivity Fee

    An inactivity fee is a sum charged to investors who haven't engaged ...
  5. Post Date

    The post date is the day, month and year when a card issuer posts ...
  6. Zero Balance Card

    A zero balance card is credit card on which a consumer does not ...
Related Articles
  1. Personal Finance

    Credit Cards For People With Bad Credit

    Yes, you can get a credit card and start repairing your credit history. But brace yourself for low credit limits, sky-high interest and staggering fees.
  2. Personal Finance

    7 Factors For Comparing Credit Cards

    It's good to find a credit card that fits your lifestyle, but read the fine print to make sure you're not overpaying for the benefits.
  3. Managing Wealth

    How Foreign Transaction Fees Work

    Using a credit card when you travel can be costly. Here's what you need to know about foreign transaction fees – plus tips on making purchases abroad.
  4. Investing

    American Express Raises Late Payment Fees (AXP)

    Membership might have its privileges, but there are still consequences for making late credit card payments on American Express balances.
  5. Personal Finance

    4 Best Credit Cards for 2018

    If you have good credit, card companies are competing for your business. Here are some of this year's best deals and credit cards you should look at.
  6. Personal Finance

    0% Balance Transfers: Can You Beat the Odds?

    Before you accept that 0% balance transfer offer, understand why you got it and who will probably profit most. Only accept if you can beat the odds.
  7. Personal Finance

    5 Credit Card Myths Hurting Your Financial Future

    It's important to understand the facts versus myths about credit cards and use them in a way that won't hurt your financial future.
Trading Center