Have you ever wondered how much money a credit card company makes? Have you ever wondered how much of that comes from late fees? Everyone has and if you havent you should because most likely these late fees has or could directly affect you.
As you have probably taken notice, credit card late fees are on the rise and have been so for awhile. There is enormous competitive pressure on interest rates and annual fees, and this has given way to a fee frenzy. For credit card issuers, late fees now represent their third largest revenue stream, (interest revenues and merchant fees rank first and second, respectively). In essence, those who pay late are now covering the costs for those users who do not carry a revolving balance and those who file for bankruptcy.
So how much are these companies making from issuing late fees? Over the years we have watched the number of these fees charged to consumers jump to record-high levels. These fees can range from $10 to as much as $40. The average more than doubled since 1996 from $13.28 to $29.84. In fact, many major card issuers are now charging a $35 late fee. Lets assume that 100,000 people made late payments for a particular month and they were charged a late fee of $30 for doing so. This would add up to $3 million in revenue. As you can see, credit card companies are making a lot of money off of card holders and there is no slow down in sight regarding the increase in late fees.
Credit card companies are making a killing off the late fees they issue to their customers and they dont mind doing it because their ultimate goal is to make money. They are like any other for-profit business in that they sell a product or service for revenue in this case, the product happens to be credit. These companies aren't just something sucking up as much money as they can. These things are run by man. And wherever man is involved, greed also becomes involved. These people are just like you and me. They may have a family to support, bills to pay, etc. Most people dont work just for the pure enjoyment, but for money, a source of income. And the more income we achieve the easier and better our lives become, supposedly.
One method in particular that I would like to address about late fees is the Skip-a-Payment technique. If you happen to know that you can't pay your bill for a particular month, just skip it. Next Month Online is an independent company, and they allow their visitors to skip a payment for a nominal fee. This fee is generally 70% less than your typical late fee. You will accrue no late fee and no bad mark on your credit report. Credit unions often offer this type of service for loans or mortgages, but first you have to fill out an application and then you need to qualify. With Next Month Online, there is no application to fill out and everyone qualifies as long as they have a credit card. Credit card companies are not very happy with Next Month Online because they are losing money every time someone uses the Skip a Payment service. This is by far the best service you can use if you know you will be late because you save a lot of money and avoid all the hassles that come with bad credit.
Credit card companies are not backing down from increasing fees. They, for some reason, do not see us as people who make mistakes once in awhile or people with other priorities in our lives. They want their money and they want it now! This is the reason you should not back down either. Hit them where it hurts, their pocket books. If you know you will be late for a particular month, just use a skip a payment service because the credit card companies will no longer be taking money from you, you will be taking money from them. |
