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Don't make the costly mistake of paying late: Credit card late fees may rise to $40 in 2020

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Paying your credit card bill late is about to get more expensive in the new year. Credit card late fees are likely to hit $40 in early 2020.

Effective Jan. 1, 2020, the Consumer Financial Protection Bureau (CFPB) will raise the permissible maximum for credit card late payment fees by $1.

  • First-time late fees: $29, up from $28 in 2019
  • Subsequent violations made within six billing cycles: $40, up from $39 in 2019

CNBC Select breaks down some common questions surrounding the increase and tips on how to avoid late fees.

Credit card late fees may rise

  • Why are credit card late fees are rising?
  • When card issuers implement the increase
  • How to avoid late fees
  • Which credit cards don't charge late fees?

Why are credit card late fees are rising?

The CARD Act of 2009 set numerous consumer protections, which included regulations on fees so the penalty for paying your bill late wasn't outrageously high. Late fees were capped at $25 for the first instance and up to $35 for additional violations made within six billing cycles.

Every year, the CFPB makes adjustments to late fees based on inflation. Late fees typically fluctuate annually by about $1 and may increase, decrease or remain the same.

While the CARD Act prevents card issuers from charging excessive late fees that doesn't mean it won't make a dent in your wallet. Nearly ten years later, late fees have increased $5 to a maximum of $40, and when you add on interest charges you pay on your balance, the costs add up.

When will card issuers implement the increase?

Card issuers can't raise fees overnight since the law generally requires they give cardholders at least 45 days notice. Some issuers may choose not to increase late fees at all. However, issuers like to copy each other — if one increases late fees, others likely follow suit shortly after.

If you card issuer plans on increasing late fees, expect to receive a notification stating how much and when the change takes effect.

How to avoid late fees

While we recommend always paying at least your minimum payment on time, it's understandable that sometimes you might miss a payment. No one wants to be charged a fee for something that's easily avoidable, so here are some ways you can prevent late fees.

  • Set up autopay. The easiest way to avoid late fees is to set up autopay. By using autopay, you won't have to worry about remembering to pay your bill each month. You can customize payments for your minimum due, statement balance or other amount.
  • Ask your card issuer for a waiver. If your account is in good standing, and you pay late, call your card issuer to ask if the late fee can be waived. It never hurts to ask, and many issuers can be understanding, especially if this is the first time you've paid late.
  • Use a credit card that doesn't charge a late payment fee. A handful of credit cards boast no late fees whatsoever. If you struggle to pay your bill on time, you might want to consider signing up for one of these cards. You will still be charged interest on any balance you carry from month to month.

Which credit cards don't charge late fees?

Most credit cards charge late fees, but there are some cards that never charge late fees or provide a one-time fee waiver.

Credit cards that have no late fees

Citi Simplicity® Card - No Late Fees Ever

  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% for the first 21 months on balance transfers and 0% for the first 12 months on purchases

  • Regular APR

    16.24% to 26.24% variable

  • Balance transfer fee

    5%, minimum $5

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

  • Terms apply.

On Citi’s secure site

Petal® Visa® Credit Card

  • Rewards

    1% cash back on all purchases and 1.5% after you make 12 on-time monthly payments

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    None

  • Regular APR

    14.49% to 25.49% variable

  • Balance transfer fee

    None

  • Foreign transaction fee

    None

  • Credit needed

    N/A

  • Terms apply.

On Petal's secure site

PenFed Promise Visa® Card

  • Rewards

    None

  • Welcome bonus

    $100 statement credit when you spend $1,500 in the first 90 days from account opening

  • Annual fee

    $0

  • Intro APR

    4.99% for the first 12 months on balance transfers; 

  • Regular APR

    12.49% to 17.99% variable

  • Balance transfer fee

    None

  • Foreign transaction fee

    None

  • Credit needed

    N/A

  • Terms apply.

Information about the PenFed Promise Visa® Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

Credit cards that waive your first late fee

Discover it® Cash Back

  • Rewards

    5% cash back at different places each quarter after you activate bonus categories (on up to $1,500 in purchases, then 1%). Plus, unlimited 1% cash back on all other purchases.

  • Welcome bonus

    At the end of your first year, Discover automatically matches all the cash back you earned

  • Annual fee

    $0

  • Intro APR

    0% for the first 14 months on purchases and balance transfers

  • Regular APR

    13.49% to 24.49% variable on purchases and balance transfers

  • Balance transfer fee

    3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

  • Foreign transaction fee

    None

  • Credit needed

    Excellent/Good

  • *See our methodology, terms apply.

On Discover's secure site

Discover it® Balance Transfer

  • Rewards

    5% cash back at different places each quarter after you activate bonus categories (on up to $1,500 in purchases, then 1%). Plus, unlimited 1% cash back on all other purchases.

  • Welcome bonus

    At the end of your first year, Discover automatically matches all the cash back you earned

  • Annual fee

    $0

  • Intro APR

    0% APR for the first 6 months on purchases; 0% APR for the first 18 months on balance transfers

  • Regular APR

    13.49% to 24.49% variable

  • Balance transfer fee

    3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

  • Foreign transaction fee

    None

  • Credit needed

    Excellent/Good

  • *See rates and fees, terms apply.

On Discover's secure website.

Discover it® Student Cash Back

  • Rewards

    5% cash back in different categories (gas stations, grocery stores, restaurants, Amazon and more) each quarter, up to the quarterly maximum each time you activate. Plus, earn unlimited 1% cash back on all other purchases

  • Welcome bonus

    Discover automatically matches all the cash back you earned at the end of your first year

  • Annual fee

    $0

  • Intro APR

    0% APR for the first 6 months on purchases; 10.99% APR for the first 6 months on balance transfers

  • Regular APR

    19.49% variable

  • Balance transfer fee

    3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

  • Foreign transaction fee

    None

  • Credit needed

    Excellent/Good

  • *See rates and fees, terms apply.

On Discover's Secure Site
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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