Late Fees

I'm never late on paying bills.  It is a hard lesson to learn but you soon discover that it is one of those priorities that you don't procrastinate on.  The cost of procrastination on this one is very high - to your credit rating and to your pocket book. 

I was just reviewing my Discover Card statement.  Mainly to understand the cash back rewards.  It takes a PHD to analyze all these rewards programs to determine who has the best program.  Occasionally, I will get motivated to understand them and attempt to actually value the points.  It is way too complicated. 

I did miss a billing period for Discover this year - April 2009.  I was too lazy to call to plead for mercy (after all it was my absent minded mistake along with some other good excuse).  The result was $10.88 in interest (on $241.97 prior statement) and $19 late fee.  I never took the time to calculate the APR - but with the next month purchases I estimate I was paying well close to 15% annualized - and that is not the compound rate!!!!).  Then add in the late fee and the cost of missing one bill is astronomical!  You make those mistakes only once every 5-10 years as it takes that long for the financial pain to wear off.

Which is why most of my bills are signed up for automatic debit from the checking account.  In fact I was unaware Discover had this feature until tonight (I just signed up for it). 

So the lesson learned here is - Don't ever ....  ever .....  ever ......   be late on a bill - especially credit cards.  The other lesson might be to avoid credit cards completely - but that is probably fantasy land.

My heart does go out to those people right now whose stress is exponentially increasing as the bills pile up, the due dates keep coming and their financial hardship increases.  How difficult it would feel to be paying these credit card interest rates every month!  What a snowball effect one would get into with late fees on top of interest payments.  With an APR of  15% it would be a real mountain to climb out of debt. I  just looked up the cash advance rate and that is 25%!  and the variable rate ranges from 20% to 28%.

So the lesson is?------  Treat your credit card like a debit card - like cash.  If it's not in the account today - don't charge it.  Not even mandatory stuff - auto repairs, HVAC repairs, grocery store.