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Why even have late fees at all? You're already paying interest.
by endisneigh 3y ago
Why even have late fees at all? You're already paying interest.
- _heimdall 3y agoYou aren't paying interest if you never pay the bill. Late fees create a predictable minimum payment that credit card companies can account for and create incentives for consumers to keep spending more under control. Consumers may not realize or care how much their total debt is growing if they could charge their CC without having to pay a certain amount relative to the total debt.
- endisneigh 3y agoIf they don't pay the bill why would they pay the late fee?
- bombcar 3y agoIf you miss a payment, you can make the payment and the late fee within 30 days and nothing hits your credit record. Various fees like that are "allowed" to be added on when you start going delinquent, and get the amount total owned much higher. It's basically usury, in all senses of the word.
- endisneigh 3y agoI understand that it's allowed. I'm wondering why not simply eliminate them since from the article they are trying to eliminate junk fees.
- bombcar 3y agoI suspect the banks were able to mount some form of "it actually costs us X" argument, which might even be understandable if you take into account mailing late notices, etc. Easier to get them to swallow a limit than a complete removal (which could come later).
- Alupis 3y agoThe indirect outcome - credit card approvals will become more strict and offer egregious interest rates, effectively locking out lower-income and/or those with poorer credit history. Then in a decade or so, we'll be having an unnuanced discussion about how racist/classist/elitist credit cards have become. This discussion is not about the people who had a single missed payment in 5 years... this is designed to "protect" the people who serially don't make payments and ring up a huge amount of so-called "junk fees". The reality is the late fees act as an incentive to make on time payments and keep debt at a manageable level. After all, that is why you make your payments on time, right? Who actually wants to throw away money on fees? It's not difficult to not use a credit card. I don't understand why we're so focused on removing personal responsibility as-of late, including the discussion around overdraft fees. We need to encourage more "adulting" and less careless irresponsibility. Living on a credit card and missing payments is a very bad financial sign, and it should be discouraged.
- endisneigh 3y agoYes you are correct, which is why credit card companies should simply not allow for large balances to be accumulated. You are forgetting that prying on the irresponsible is the entire point.
- Alupis 3y agoThey generally do not. If you are low-income and/or have poor credit history, your approved credit will be relatively small. Even with a $500 credit line, people miss payments. Often it's the folks with huge credit lines and carry balances that never miss payments... > You are forgetting that prying on the irresponsible is the entire point. The credit card market is not inherently bad. Many (most?) people use it responsibly, even if they carry a balance. We don't need to make it harder on responsible people just because some people are irresponsible and don't care to become responsible.
- endisneigh 3y agoNo one ever said credit cards are inherently bad so I'm not sure what you're responding to. Anyway, credit cards are already harder to get without good credit. And yes it should be harder for people to get credit cards, but that's not in the incentive of the companies which is why they issue them anyways.
- hammock 3y agoHow is being late on a minimum payment a junk fee?
- endisneigh 3y agoIt's unnecessary since you are already paying interest. Why are you paying interest? Because you are late on paying your entire balance. If they want to collect late fees they should stop accumulating the interest. Of course they won't since that's the entire point.
- Alupis 3y agoThe outcome of this proposed policy would be interest charges immediately, instead of being assessed monthly. It's not actually free to loan someone money... which is what happens when you swipe your credit card instead of your debit card and float the charges until the end of the billing period.
- endisneigh 3y agoThere's no point of speculating - is what you're suggesting happening? You seem to be under an illusion that you cannot make money without late fees, which is false.
- Alupis 3y agoWrong, I'm saying late fees are not an issue for anyone who makes on-time payments. They're literally called "late fees". Heck, the late fees on my credit cards might as well be $1,000 per day or something - it doesn't matter because I make payments on time as a responsible adult. Late fees discourage irresponsibility. That is why movie rentals had late fees, libraries have late fees, utility bills have late fees, rent, mortgage, and credit cards all have late fees. It encourages you to be responsible. Therefore, reducing late fees increases irresponsibility.
- endisneigh 3y ago
- INGSOCIALITE 3y agothe fact that credit cards are offered with interest at all is usury
- ticviking 3y agoeven 0.5% interest on recourse debt is fundamentally usury.
- bombcar 3y agoThe world is not ready to face this terrifying truth.
- warkdarrior 3y agoIf a credit card had no interest and no fees, why would I ever pay it back?
- bombcar 3y agoBecause you want to use it again? Imagine a secured card of this type, against your $1k in the bank. You could use it and never pay it off, but now you can’t use it again until you pay it down.
- jebarker 3y agoIsn't this basically an overdraft?
- bombcar 3y agoNo, because the bank would always have recourse to something (the security). If you're limited to something the bank can take (and only that, excluding fraud, etc), the bank will self-regulate and not loan more than negotiable amount - cost of negotiating - this is where the 80% maximum normal home loan comes from. The bank (mostly) ignores the risk the value could go down, but understands that when all is said and done a foreclosure of a $100k house will net about $80k for the foreclosing entity. With this you can finagle yourself down to zero (own a home, take a mortgage for 80%, squander the money, get foreclosed, have nothing) - but if the bank will lend more based on being able to go after you for the difference (recourse) than you can finagle yourself down to negative amounts.
- gosub100 3y agoThey don't want their card to get shut off.
- wolpoli 3y ago> Late fees create a predictable minimum payment that credit card companies can account for and create incentives for consumers to keep spending more under control. Consumers may not realize or care how much their total debt is growing if they could charge their CC without having to pay a certain amount relative to the total debt. You just described minimum payment, which is separate from late fee.
- _heimdall 3y agoThey can't charge late fees without minimum payments. What would be late exactly if a payment wasn't required?
- zamadatix 3y agoGP is saying "minimum payments + interest already do the things you list as needing late fees for" not "there should be no minimum payments". I.e. regardless if there are late fees or not: you can't be delinquent on any debt, regardless of label, indefinitely. Also regardless if there are late fees or not: the amount you're delinquent will already increase exponentially more than just the sum of the minimum payments you missed because of interest.
- wolpoli 3y agoAnd if the borrower does not pay the minimum monthly payment (% of outstanding balance) several months in a row, that is already sufficient signal to the bank to take further actions, such as sending reminder letters or locking the card. Late fee is not needed for that function.
- the_svd_doctor 3y agoIf there is no minimum payment then, by definition, there can't be any late fee since you're never late and can simply not pay forever without being delinquent.
- ThunderSizzle 3y ago
- throwitaway222 3y agoIf you never pay the bill they take you to court. There still doesn't need to be a late fee.
- tintor 3y agobank profit