- In January he missed a payment, so he got charged a $29 late fee.
- In February his balance was more than $600 but his credit limit was $500. He got charged a $35 over-the-limit fee.
- In February his payment arrived late so he got a late fee of $29.
- Because he missed or was late on two payments, and because he went over the limit on his account, his interest rate increased from 13.99% to 24.99%.
- Greater fees and more interest meant $100 more debt after just three months
| Take a look at this example to find out why it’s important to pay on time: Edwin has a new credit card with a 13.99% APR and a $500 credit limit. He spends a total of $900 over three months. He pays off a total of $600. Look at these two scenarios. In both scenarios, Edwin spends $900 on his card and pays off $600. In Scenario 1, at the end of March, he owes $313. In Scenario 2, he owes $416. Depending on when Edwin pays, he can owe $100 more on his credit card after just three months just by paying late! Scenario 1: Paying on time
Scenario 2: Late payments
Scenarios assume $29 late fee, $35 over the limit fee, average daily balance billing, and a $500 credit limit. What happens in Scenario 2? Edwin has paid just as much money. But he missed a payment in January, his February payment arrived late, and he paid on time in March. Because of this, although he’s paid just as much money, he owes $415 – more than $100 more than if he had paid on time!! This happens because: Paying on time made a big different for Edwin, and it can for you too. | |