The #3 Credit Card Sleight of Hand: Payment Cut-Off Time

By Eva Norlyk Herriott

There was a time when credit card late fees ran between $5 to $10, and only rarely exceeded $15. And no, this wasn’t back in your grandfather’s days when the purchasing power of a penny was equivalent to a dollar (and credit cards, by the way, were non-existent). This was less than fifteen years ago.

Then in 1996, the U.S. Supreme Court lifted the restrictions on credit card penalty fees. Within a short time, fees soared upwards to around $30 and they have been climbing ever since. Today, late fees of $39 are increasingly common, and penalty fees have become a significant source of income for card issuers. Including late fees, over-the-limit fees, and charges for returned checks, credit card companies today rake in more than $15 billion a year in penalty fees alone.

With penalty fees being such a lucrative business, it can be tempting for credit card companies to—well, stack odds ever so slightly in their favor. The #3 credit card sleight of hand is a subtle manipulation of payment times and stipulations, which can easily trip you up, if you’re not aware of them. Not all card issuers play these games, but some do, and it’s up to you to know the terms that govern your credit card. Here are a couple of sleight of hand payment practices to look out for.

1. Payment is due by—1 pm? Most credit card companies have a payment cut-off time by 5 pm, but some have earlier cut-off times. That means that if the payment arrives by the due date, but after the cut-off time, it’s considered late. According to the Massachusetts-based non-profit consumer advocacy group, National Consumer Law Center, card companies have been known to set cut-off times as early as 9 or 10 a.m.

Not surprisingly, the practice of setting cut-off times has met with a lot of criticism. The Federal Reserve Board has been proposing new rules, which would at the very least require card issuers to post cut-off times clearly on the front of monthly statements rather than hidden away in the fine print on the back of the statement.

2. You got a late fee because you didn’t enclose the billing coupon? That small print on the back of the credit card bill lists very specific payment guidelines. Typically, in order to be credited immediately, the payment must be received not only at a specific address, but it must also include the billing coupon sent with the credit card bill. If not, the payment processing could be delayed by as much as 7-10 days.

3. Your payment arrived late, because the due date changed? Most people are used to paying their credit card bills monthly at around the same time. Some credit card companies in recent years have shortened the billing cycle, allowing only 20 to 22 days between bills. This makes it much more easy to miss the payment due date.

Fortunately, as credit card sleights of hand go, these little tricks have an easy fix. Be sure to look at the payment due date on your bill each month. Bypass the issue of late payments altogether by either making credit card payments online or simply mailing your credit card payment with plenty of time to spare.

Published: August 3, 2009