The true cost of late fees
Paying late fees is costing you more than you know.
Are your bills paid by the due date? If not, chances are you will be charged a late fee. A late fee is an additional charge that the borrower is responsible for paying, if a payment is not made on time. Living within a cycle of late payments is costly and detrimental in other ways.
The average consumer has multiple bills which charge late fees. Late fees usually average between 10 percent and 15 percent of a monthly bill. These extra costs can devastate a budget that is already tenuous, leaving the borrower with less money for necessities and savings.
Overdue utility and cell phone bill payments will incur late fees and the possible cessation of service. If the bills are not paid in a timely manner and the service is terminated then a ‘restoration’ fee must be paid before the service is available for use.
Late credit card payments will not only result in a late fee but may also increase your current interest rate to a penalty interest rate. A consumer may temporarily be excluded from participating in rewards programs and lose any promotional rates on purchases or balance transfers.
Mortgage payments that are not made on time may trigger the start of the foreclosure process on the property. Banks or mortgage holders can initiate the legal action required to gain possession of the borrower’s home.
In most instances, late payments are reported to the credit bureaus. Late payments will reduce credit scores, and make it harder for borrowers to obtain new credit. Insurance rates and job opportunities will be negatively impacted. Insurance coverage will be more costly and employment offers may not be extended.
Michigan State University educators invite you assess your financial health and visit Michigan State University Extension. In addition, Michigan State University offers money management and homeownership classes. For more information about classes offered in your area visit MI Money Health.