How to avoid credit card late fees after a court threw out a proposed cap

By CORA LEWIS NEW YORK AP A Texas judge earlier this month threw out a federal rule that would have capped credit card late fees at Related Articles Coca-Cola reports better-than-expected quarterly profit says it can manage through tariffs GM posts strong Q results but will reassess expectations for due to auto tariffs Amazon is not planning to break out tariff costs online as White House attacks possible move UPS to cut jobs close several facilities as it reduces amount of Amazon shipments it handles Major companies face a challenging task in estimating the impact of tariffs on their business The Consumer Finance Protection Bureau finalized the rule last year as part of the Biden administration s efforts to do away with what it called junk fees It was paused by the courts before it could take effect At the time the CFPB estimated that American families would have saved more than billion in late fees annually had the fees been capped at significantly less than the average Banks and industry groups argued that the rule didn t allow card issuers to charge fees high enough to deter late payments and discourage repeat violations The Texas judge s ruling earlier this month came a day after a collection of major industry groups and the CFPB under President Donald Trump revealed that they had reached an agreement to throw out the rule Here s what to know about credit card late fees What is the average credit card late fee The average late fee for major issuers has steadily ticked up since the s going from at the end of to in according to the CFPB WalletHub which tracks financial facts detected the average late fee in to be with the maximum A September Consumer Reports research estimated that in American adults or about million people paid a credit card late fee in the previous year People with lower incomes pay proportionately bigger fees according to the CFPB with the highest burden falling on communities of color and those living paycheck to paycheck How can consumers avoid the fees Enrolling in auto-pay for your credit cards can help you avoid making late payments and there are various credit cards that don t charge late fees at all though it s crucial to note that these cards may have other fee or penalty structures or higher interest rates Citi Simplicity and the Apple card do not now charge late fees and Discover offers a card that will automatically waive the first late fee It s also manageable to appeal credit card late fees charged by your credit card company by calling them directly The companies will often reverse the fees especially if it s your first late payment You may also want to consider making payments on your credit card balances during the month That means you ll have paid more of the balance by the time the amount comes due and keeping your balance low relative to your credit limit can improve your credit total If you re having trouble making ends meet you can ask your credit issuers about hardship programs These are typically available to people affected by job loss illness or curative conditions natural disasters or other emergencies What was the CFPB credit card late fee cap rule about Concerned that credit card companies were building a business model based on high penalties Congress passed the Credit Card Accountability Responsibility and Disclosure Act of CARD Act which banned the companies from charging excessive late fees and established clearer disclosures and consumer protections In the Federal Reserve Board of Governors voted to issue a regulation implementing the CARD Act which declared that banks could only charge fees to recover costs associated with late payment However the rule included an immunity provision that let selected banks charge for the first late payment and for subsequent late payments adjusted for inflation each year Those amounts subsequently grew to and After a review of realm details the CFPB finalized a rule that would have capped late fees at and ended automatic inflation adjustments Based on records analyzed by the CFPB a late fee of would be sufficient for card issuers on average to cover collection costs incurred as a end of late payments How have banking groups responded to the court decision Industry groups including the Consumer Bankers Association American Bankers Association the U S Chamber of Commerce and others reported they welcomed the court s decision eliminating the cap The groups commented that the rule would have led to higher interest rates and reduced credit access for card holders The groups also stated the rule would have reduced vital incentives for consumers to manage their finances The CFPB has estimated that banks bring in roughly billion in credit card late fees a year How have consumer advocates responded Horacio M ndez president and CEO of Woodstock Institute an organization for advancing economic equity called the ruling a devastating blow By tossing out the CFPB s common-sense rule to cap these predatory late fees particular as high as a federal judge is putting corporations over the lives of everyday consumers he reported The CFPB s rule was borne out of clear evidence the credit card industry was using inflated late fees as a profit engine forcing families with the least financial cushion to pay M ndez noted that while consumers have come to expect fees for services those fees needn t be punitive to be effective The Associated Press receives help from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy The independent foundation is separate from Charles Schwab and Co Inc The AP is solely responsible for its journalism