Don't Expect a Break on Credit Card Late Fees -- Judge Nixes Late Fee Limit

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If you were hoping for relief from sky-high credit card late fees, you might be out of luck.

A Texas judge on Tuesday threw out a proposed Biden-era rule limiting credit card late fees to $8, granting a request from the Trump administration's Consumer Financial Protection Bureau to scrap the rule.

Opponents of the rule -- including the American Bankers Association and the US Chamber of Commerce -- said that the late fees deter late payments and that the cap would've disincentivized credit card companies from offering credit to applicants with less-than-stellar credit. 

Late fees cost Americans $14 billion annually, according to the CFPB, which issued the ruling in March 2024. Many financial experts say that the fees, which typically increase for repeat offenders, harm those who can least afford them.

"If you slip up from time to time, you can probably get the fee waived," said Gerri Detweiler, a credit expert and member of CNET Money's expert review board. "It's those who are having trouble paying their bills who are hurt the most by pricey late fees."

The cap, which was blocked last year before it could go into effect, is the latest rule for the CFPB to drop. The consumer watchdog has been decimated by cuts made by the Trump administration and seen many of its rulings reversed.

Here's how you can protect yourself from paying another costly fee.

When are late fees charged?

Late fees are charged if you don't make at least the minimum payment by the due date. For example, I was late on one of my cards a few months ago and the next day, Chase hit me with a $20 late fee. Card issuers only report missed payments to the three major credit bureaus after 30 days, so you can avoid damaging your credit score by making your payment quickly.

How much will late fees cost?

Late fees can be as high as $40, although first-time offenders typically pay less. You can see how much your card issuer charges in your card's Schumer box, the table of terms and conditions included with your card application. You can also find the info on your card issuer's landing page.

For example, if you're applying for the Blue Cash Preferred® Card from American Express, you can click on "rates and fees" and find out that its late fee is "Up to $40" (see rates and fees, terms apply).

Your exact fee may depend on how frequently you're late with payments and your overall relationship with your card issuer.

How to avoid late fees

Setting alerts on your account is the easiest way to avoid a late fee. When I was hit by Chase's late fee, I realized I hadn't enabled text and email alerts. I promptly rectified that and haven't had any issues since. It's a good idea to set the alert for a few days or a week before your due date. 

Another option is to pay off your card immediately after making a purchase -- essentially treating your credit card like a debit card. That way, you won't miss your payment or accrue interest.

You can also set up automatic payments for your cards, even if it's just the minimum payment.

"While this won't pay off your credit card balance to avoid interest fees, it will eliminate late fees and negative marks on your credit report that can make the situation worse," said Lee Huffman, personal finance expert at BaldThoughts.com.

You can also set your automatic payment to cover your full statement balance to avoid interest charges. Just make sure you have enough money in your bank account to cover the balance or you could get hit with an overdraft fee.

If you're charged a late fee -- especially if it's your first offense -- try reaching out to your card issuer to ask for it to be waived.

"Customer service has a lot of power in waiving late fees, especially if you're a good customer and this is a one-time exception," Huffman said.

Evan Zimmer has been writing about finance for years. After graduating with a journalism degree from SUNY Oswego, he wrote credit card content for Credit Card Insider (now Money Tips) before moving to ZDNET Finance to cover credit card, banking and blockchain news. He currently works with CNET Money to bring readers the most accurate and up-to-date financial information. Otherwise, you can find him reading, rock climbing, snowboarding and enjoying the outdoors.