No 'Late
Fee' Credit Cards - An Invitation For Disaster?
In an effort to
draw in more customers and to retain the loyalty of existing ones, credit card
manufacturers have started advertising "No Late Fee" cards, targeting the
masses that have expressed extreme distaste in having to pay excessive late
penalty fees.
However, the
alternative to late fees may be much worse then a $39 penalty. Instead of a
one-time fee, your credit card company may increase your interest rate more
than 20% if you are late on a payment. In fact, they can increase your rate if
you are late to any creditor! Yikes!
The Citibank SimplicitySM
Card starts off with an 0.0% introductory rate and then increases to a
reasonable 10.24% (21.74% for cash advances) after one year. However, per
their terms and agreements, "all your APRs may automatically increase up to
the 30.74% variable default rate if you default under any Card agreement that
you have with us. We may also increase the promotional rate if you fail to
make payments to another creditor when due."
Citibank will
also continue to charge fees for cash advances and exceeding your credit
limit.
The American
Express Clear Card, however, promotes itself as being 'Clear' of all fees: no
annual fees, late fees, no overlimit fees, no cash advance fees. They also
offer cash-back awards, online account management, account alerts to notify
you when payment is due, when irregular account activity is detected, and when
you are nearing your credit limit.
Again, though,
if you are late on just two payments a year you may find your interest rate
skyrocketing to 28.74%. In either case, you could end up paying hundreds, or
even thousands of dollars in extra interest payments instead of a 'late fee'.
On the bright
side though, if you are rarely, if ever, late on your credit card payments
then clearly (no pun intended), the American Express Clear Card may be the
perfect fit for you.
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