6 Ways to Beat Late Fees

Late fees are potentially everywhere Did you know late fees are assessed on just about all your monthly bills? These include bills related to your mortgage, cellphone, cable, utilities, insurances, credit cards, library books, traffic tickets and even kids' activities. And, of course, Uncle Sam assesses severe late fees and penalties if you're past due with your tax payment.

"Issuers claim they are a way to account for risk, but our research in the credit card industry shows that is not the case. They are trying to maximize revenue with late fees," says Josh Frank, senior researcher for the Center for Responsible Lending.

Financial experts agree that credit card late fees have been reined in somewhat by the Credit Card Act of 2009, which limited late fees to $25 for the first violation and $35 for subsequent violations. But these rules have substantial loopholes and do not apply to small-business credit cards or any other type of late fees, which can ring up at $39 each and more for past due payments -- on your mortgage, for example.

Late fees have big consequences "While late fees (for many debts) are not reported to the credit bureaus, the late payments certainly are. That loads your credit report with delinquencies and can trigger a rate increase on your other cards for all future purchases," says John Ulzheimer, president of Consumer Education at SmartCredit.com. Say you have one of those zero percent interest credit cards. Many have a clause that says one late payment will have the account default to an interest rate as high as 35 percent.

Another caveat: "Credit card issuers can revoke your air miles, rebates and rewards for late payments. You may be able to reinstate them, but you'll be charged a reinstatement fee," says Frank.

Dave Ramsey, personal finance expert and radio talk show host, says, "When you pay your bills late and incur that extra charge, you're simply paying more and more every month. You're putting yourself deeper into debt and making it harder to pay in full on time next month."

Late fees are not in your budget The 2011 Financial Literacy Survey from the National Foundation for Credit Counseling found that more than half of adults don't keep a budget or track their expenses. In order to break the cycle of debt and late fees, Ramsey suggests you first figure out exactly where your money is going. "Make a written budget that gives each dollar a name -- including late fees," he says. You will be able to see just how much money you've been paying in late fees every month and what you can cut if you can pay each bill on time.

Says Ulzheimer: "You have to pay on time and be smart about taking on liability. If not, you are going to have a serious compounding problem unless you bring in more income or spend less."

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