Credit card late fees capped; ways to save even more
HOUSTON - People struggling to keep up with credit card payments are getting a little relief. This week, the Biden Administration announced a limit on late fees that credit card companies can charge.
But let's face it, if you're paying late, you may be struggling with much more than late fees. Credit card debt has hit record highs, topping $1 billion last year.
"I had bills on there, I just had everyday things," said Edidiong Obot.
Obot has experienced what millions of Americans are facing: mounting credit card debt.
"It's like, OK, I'm just going to pay it all off in one lump sum. And then, you know, when life happens, you can't pay it all off in a lump sum because it goes down. It goes to health bills or your car breaks down or your family member needs something," said Obot.
Many credit card holders say they are struggling with high inflation, high interest rates, and high delinquencies. The New York Federal Reserve reports late credit card payments soared by more than 50% in 2023.
The Consumer Financial Protection Bureau just slashed credit card late fees from an average of $32 to a cap of $8, a cut that could help many cardholders.
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But financial expert Matt Schulz writes in his new book, Ask Questions, Save Money, Make More, that many cardholders who don't regularly pay late, don't realize they could get some late and annual fees waived simply by asking.
"That $10 or $30 is a grain of sand on the beach for a really big bank. But they know it will make you feel good and keep you around spending money," explained Schulz.
And a LendingTree survey found 76% of customers who asked their credit card lenders for a lower interest rate received one. Their APR is reduced by an average of 6%.
So Schulz says it's worth calling your credit card lender and asking for a rate reduction.
"I’ve been a good customer, I like using the card, but my interest rate is 27%, and I just found this card that I can get for 21%. Will you work with me?" suggested Schulz.
Another tool to deal with debt are non-profit credit counseling agencies, which can negotiate with your creditors to lower your interest rate and total debt.
Obot turned to the non-profit Money Management International, which helped her set up a budget and pay off her debt in three years.
"When I was finally debt free, I got a notice from MMI that said, 'You have finished your final payment.' I was like, yeah!" said Obot.
You can find non-profit credit counseling agencies through the National Foundation for Credit Counseling.