Fine print, Living with credit, Protecting yourself

Timing is everything for some credit card payments

Connie Prater

What time is your credit card payment due? Yes, not what date is it due (though that, of course, is important). But do you know the cut-off time your credit card company sets for processing payments? For many credit card issuers, missing that cut-off time on the due date — even if you miss it because of U.S. Postal Service problems or issues far beyond your control — means they tack on a $39 late payment fee.

What time is it?
This question of time is coming up more often these days as more consumers realize they’re getting hit with late fees. Too many late payments puts you at risk of defaulting on your credit card agreement and getting an interest rate increase.

This little gem was in the fine print of a BP/Amoco Chase gas credit card:

“If your payment is in accordance with our payment instructions and is made available to us on any day except December 25 by 1:00 p.m. local time at our post office box designated for payments on this statement, we will credit the payment to your account as of that day. If your payment is in accordance with our payment instructions, but is made available to use after 1 p.m. local time at our post office box designated for payments on this statement, we will credit it to your account as of the next day.”

Please note: I have deliberately ENLARGED this print to call attention to it. You won’t likely get this kind of service from the credit issuer. The type on the back of your monthly statement may be this big.

Anyway, the “local time” in this case is Illinois (Central time zone). The fine print goes on to say that if you don’t follow the instructions for placing the payment stub in the envelope, including the account number on your check and making that out to the appropriate division, the payment could be subject to a 5-day delay before it is posted to your account.

New disclosure rule
The fairness of the practice of setting cut-off times for credit card payments has caught the attention of federal regulators. The Federal Reserve Board, which mandates how lenders must disclose important facts about their loans (including credit cards), has proposed a new rule aimed at addressing fairness concerns.

The Fed wants to require credit card issuers to post cut-off times near the due dates on the FRONT of monthly statements if the deadlines fall before 5 p.m. Currently, there is no requirement for notifying cardholders about cut-off times, although many lenders provide this information on the back of the statement, often in teeny-tiny print.

Victor Barry, a Chicago credit card owner, wrote the Fed: “I do believe they are trying to make their customers miss payments so they can extract their exorbitant fines and fees…”

Lenders contend the current disclosure is clear. Some credit card issuers give customers a few days cushion before assessing late fees (referred to by Discover bank as a “silent” late fee grace period); other banks do not. Says the Fed: “Consumers would be able to make better decisions about when to make payments in order to avoid late-payment fees and default rates if earlier cut-off times such as 12:00 p.m. were more prominently disclosed.”

Not good enough, says the National Consumer Law Center, a Massachusetts-based non-profit consumer advocacy group. The group filed an 87-page comment with the Fed regarding a host of revisions in the disclosure rules (called Regulation Z).

“Cut-off times offer creditors the opportunity to manipulate payments in order to increase late fees and penalty rates. They also cause consumers a high level of frustration and a sense of helplessness,” the group contends. “In reported cases, creditors have used times as early as 9 or 10 a.m. as the cut-off time.”

Good enough for the IRS
The law center notes that credit card users have no control over delays that may occur during the mailing process (Does your U.S. mail arrive at the same time every day?). Yet they are penalized with late payment fees. A better alternative, the law center says, is to use a postmark date as the cut-off. If it’s good enough for the U.S. Internal Revenue Service on April 15 each year, why can’t creditors accept it?

Advocates also cautioned about due dates that are set on non-business days — when there’s no way a payment can be processed. “Creditors should not be allowed to rig the system to trap unwary consumers,” the law center writes.

Consumers are slowly catching on to what’s happening — and they’re angry about it. Colleen O’Hare told the Fed she pays her bills online but the payments are rarely posted on the day of her transaction.

“I went into the Washington Mutual site to pay my credit card early in the morning on the date it was due and I was ‘forced’ to select the next business day as my payment date. I could not pay the same day without adding an ‘express fee.’ Because of the fact that I was forced to select the next business day, I was charged an exorbitant $39 late fee. This is an outrageous practice and I believe an unlawful practice of Washington Mutual’s. My American Express cards not only give me 10 days grace period without charging any late fee, but they also clear the same night that I submit my payment to them. The same holds true of my other credit card companies.”

Angela M. Stockton had a similar complaint:

“I recently canceled an AT & T Universal Visa card after being a customer for over 20 years. I was irate that AT & T, which had used the 19th of the month as a due date for most of those years was gradually moving it earlier and earlier, until the last bill I received had a due date of the 14th. I’m convinced that they were counting on my not reading the due date so that I’d mail my payment late and they could charge me a late fee.

“My husband has a Chase Freedom MasterCard which has resorted to the same due-date creep … Credit-card companies should not be allowed to change due dates willy-nilly like this.”

See related articles: “Fed backs rules to curb deceptive credit card practices,” “Credit card industry gets fire from Senate,” “Study: Too much optimism leads to late credit card payments

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  • Barbara Tingle

    I have a Meijer Credit card that is through GE Money Bank. My payment due date is usually the 4th or 5th of the month. Dec. I had 2 due dates. 12/5/07 and 12/30/07. Naturally I paid the 12/5/07 on time but didn’t pay the 12/30/07 on time I paid it 1/2/08 which would have been on time had they not changed the due date. I hadn’t noticed the change on the bill. For this I had a $29.00 late fee and defalte rate went to 28.40%.I am sure they did this on purpose. Dec. is a financial drain on most people and also a very busy time. I am sure they knew most people would not notice they changed the date since they put “Days This Period” as 30, which was a lie. It was 25 days. Some how I think this is fraudlent.

  • Barbara,
    Did you try calling the customer service number and asking to speak to a supervisor? They may take the late fee off. They may also roll back the interest rate hike.
    A default after just one late payment? You can request that they reduce the rate to previous levels and then close the account. Worth checking with them about this. How long have you been a customer?
    Take a look at this Ask The Credit Guy column on opting out of credit card increases:

  • Jennifer

    I have two credit cards that pull yet a different scam with time when scheduling online payments. Old Navy and JCPenney both have time cutoffs for payments, which is standard, however the cutoff time only applies the DAY BEFORE your payment is due. I just paid my bill at 3:01 PM and they are allowing it to post tomorrow, it’s not due for another week. However, if the bill was due tomorrow, they would NOT allow you to select tomorrow as a payment date, you would have to select the following day which would incur late fees. It’s even worse if your payment is due on a Monday, better make sure you pay it by Thursday, because if you try to pay Friday after Noon the earliest date you can select is Tuesday. Again, this ONLY applies if your payment is due the next day. If your going to have a rule it should work on all days and not just the days they can charge you a late fee. This is clearly a scam if you ask me, they can process payments quickly on one day but not another???? Right…… Customer service would not reverse the late fees on either account.

  • Vernon

    I paid a payment to Chase 1 day early only to get a letter scolding me that I missed a payment on the following statement. Calling to ask what was up with that I was told that the payment was made before the end of the last period and therefore did not count as a payment during the current period. So in effect they told I missed one months payment as I missed the due date. They did not charge a late fee however I was warned that it was removed and it would count as my one time ability to get a fee removed. I know this is confusing but so are all of the charges/fees and justifications they use to support them. So, you can’t pay early and you can’t pay late.

  • Danielle

    I used to have a credit card from Capitol One and they were horrible!! I would mail my payment with plenty of time for it to get where it needed to go. Unfortunately they continually told me the payments were late. Funny how the payments were received before the due date when i PAID the post office to track the letter! Even more money wasted on a money wasted on a dishonest company.

  • chege

    i have a card from hscbc or account central and i paid my balance off on the due date instead of the minimum and then they hit me with a 39 dollar fee ,i called to complain about an unauthorized transaction nobody got back to me they are real time crooks!help!

  • Chege, I’m not sure what your balance was on the card that you paid off, but this might be an issue of residual interest:

  • Rebecca De Lany

    I paid a BP Amoco bill online the date it was due. They posted it the next day and charged me a $29 late fee. I have cancelled the card and will not pay that fee. They are attempting to defraud me and I am not going to concede defeat for something so blatantly wrong.

  • joecredit

    A deal is a deal, except when the big shots decide they ended up on the wrong side of the deal they promoted. Humans need to live with the consequences of their actions rather than make other people feel responsible for their mistakes. What you sow is what you reap.

  • Mkey

    I have a Chase credit card and made my payment online the date it was due. They charged me a late fee, when I called to have it reversed the said I didn’t meet their cut off time so I got charged the late fee. They tried to tell me that the banks were closed at the time I paid it , HOWEVER, banks are never truly closed. Transactions online are instant.

  • Maria Mattaliano

    I have a MC from Sears, my due date has been the 15th of every month, except for December and January, they changed it to the 13th, I was charged a late fee last month, because I paid it on the 15th. I just got a new statement and the due date has been changed back to the 15th.
    I am paying of my bill and never use this card again.

  • Patricia

    I thought credit card payments could not have a due date of a Sunday or Holiday. If they did, you had the next day to make a payment without a late fee. Bank America said this is not the case because they are open 24/7. What gives with this outfit? I do believe they think they are above the law.

  • tricia

    I’m real interested in the progress of the National Conumer Law Center in Mass. My husband and I have had similar problems with credit cards – automatic payments have been made for quite a while now and then the companies change the due date and charge $39 late fees. They will not even talk to us regarding the late fees. We’re talking about a year or more of payments on time and for more than the minimum amount – if we repeatedly missed payments or were late with them, the late fee would be just.

  • Lori Austin

    I was under the impression that if you paid on the due date..even if it is 11:59pm, that they could not charge a late fee. I am having a dispute with Home Depot. They want to charge me because I paid after 5PM. Isnt this one of the issues addressed in the new laws.

  • Amber

    My dad opened a US Bank card for me in-case of emergency. While I was on my honeymoon my camera broke so I used the card on 9-12-11. Since I am not the primary they will not tell me when the balance is due. When will they ask for a payment is it at the end of this month? next month?? Plus will this help my credit?

  • Penelope Foran

    It is perhaps a small comfort to see I am not alone in feeling put upon by the Banks. I have just been levied a late payment fee for paying early. I have been paying this account on time for 3 years. Wells Fargo. So, if I were to travel for three months, would I have to pay someone to pay my card while I was gone? I’m disabled and living on a very limited income. wonder people protest!

  • Jack Damm

    I have had similar problems with the posting of payments on my U.S. Bank credit cards. I used to mail my payments to them in plenty of time, but surprisingly the payments would always be posted 1 day late. So I began paying in person at a local bank branch to make certain that they could not “delay” the credit. Now they routinely make the due date fall on a weekend or on a holiday instead of a regular business day. Now they are telling me that I must make my payment on the PREVIOUS business day in order to get credit. After 20 years of spending tens of thousands of dollars on their credit cards I am taking my business elsewhere.

  • When will they ask for a payment is it at the end of this month? next month?? Plus will this help my credit?

  • Bobbie

    Mkey said:
    I have a Chase credit card and made my payment through their automated system the date it was due. They charged me a late fee, when I called to have it reversed the said I didn’t meet their cut off time so I got charged the late fee. However this was a closed account. I am trying to pay it off. While talking to the agent I saw they had charged me also a late fee last month. I asked to speak to her supervisor and she asked me why? Then she states she could waive the late fee if i would have asked her. But of course i only get one every six months. WHAT She waived it placed me on hold for a supervisor and i got disconnected. I call back asked to speak to a supervisor and of course only to be told i could speak to her assistant……..What less stress soon debt free