Easily Avoid the 5 Late-Fee Mistakes That Hurt Summer Cash Flow
Late fees hitting your bank accounts during summer can feel especially harsh. You may be planning a fun getaway or the purchase of a family pool and then suddenly you’re hit with a huge late fee.
According to Brandon Gregg, certified financial planner (CFP), advisor with BBK Wealth Management, you can avoid late fees by knowing your budget and expenses. “A solid understanding of your monthly bills and cash flow will prevent bills from piling up and avoid late fees.”
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Once you’ve taken that step, here are five late-fee mistakes to avoid making this summer to keep your cash flow in check.
1. Seeing Autopay as an Automatic Protection Net
“One of my clients had set up autopay for four of his accounts and considered himself safe because of it,” said Cody Schuiteboer, president and CEO of Best Interest Financial. “However, he didn’t take into consideration that during one week in June the amount in his checking account was very low and that both of his summer camp expenses and car insurance fell together and there were no payments for two accounts because of that.”
Schuiteboer said that according to issuers, failure of autopay equals missing a payment and the client was charged the first late fee in the amount of $30, followed by another one in $41. Additionally, he lost the grace period and his new purchases began to earn interest instantly despite making payments. In one month, he had paid over $100 in late fees and interest rates, per Schuiteboer.
You can avoid something like this happening to your finances by regularly reviewing your auto pay accounts and making a note on your calendar when you have unusual expenses coming up.
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2. Confusing the Grace Period With the Buffer
According to Schuiteboer, in most cases, the grace period offered by credit card issuers goes anywhere between 21 and 25 days.
“However, the grace period is valid only if all charges from the previous billing cycle are paid,” he said. “Therefore, if a person does not make timely payments in May, then he misses the grace period in June and interest rate kicks in immediately upon making purchases without waiting until the end of the billing cycle.”
According to Annie Cole, EdD, money coach and founder of Money Essentials for Women, you can avoid this situation by first making sure you understand what you’re being offered. One thing to watch out for is that, in some cases, you may be given a grace period that still comes with fees for late payments.
3. Failing To Call the Issuer To Request a Waiver of Late Fees
“In 2022, Americans were charged $14 billion in credit card late fees,” Schuiteboer said. “Out of this sum, quite a large number would have been avoided if only customers made a quick phone call. Issuers would readily waive the first late fee for anyone who pays regularly.”
Schuiteboer said all you need to do to avoid paying is to call the customer service, explain the situation and receive a waiver. It takes about four minutes and avoids spending $30 to $41, he added.
4. Forgetting To Set up Email Alerts
Per Cole, here’s a tactic to automate your way to better finances. You can set up an account so you receive email alerts if your payment fails.
“If your credit card expires down the road, you’ll get notified right away rather than waiting to get notified of a non-payment or later-payment issue,” she said.
5. Stacking Due Dates
Many people prefer consistent due dates so they can pay bills simultaneously and forget about them.
“The issue is that unless you have enough cash on hand to cover all bills, most single paychecks won't suffice,” Gregg said. “It's good to spread out due dates throughout the month so that cash flow isn't hurt.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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