Your credit card late fee may increase in 2017, based on an adjustment to the maximum allowed late fee. Credit card issuers will be allowed to charge $27 for the first late fee and $38 for the second late fee. These maximum fees apply to other credit card penalties, like over limit fees as well. The limit on penalty fees only applies to consumer credit cards; business credit cards don’t have the same protections.

Why Are Maximum Late Fees Increasing?

When it was passed in 2010, the Credit CARD Act capped late fees at $25 for the first incident and $35 for the second late payment within a six-month timeframe. There’s one caveat in the language for the law – the maximum late fee may be adjusted each year based on the annual percentage change in the Consumer Price Index. The Consumer Price Index is a number that measures changes in purchasing power and rate of inflation.

Each year, the Consumer Financial Protection Bureau publishes credit card penalty fee threshold adjustments based on changes to the Consumer Price Index. Credit card issuers are at liberty to adjust their late fees based on the legal maximum. According to the Wall Street Journal, American Express is the first major credit card issuer to adjust its late fees. That means, in 2017, Amex cardholders will pay $1 more for a second late fee in a six-month period than they would have in 2016.

Pay close attention to all mailing from your credit card issuer for advance notice that your penalty fees may increase.

How to Avoid Paying a Late Fee

You can avoid penalty fees by knowing and sticking to the terms of your credit card. For example, you can avoid a late fee by sending your payment before the cut off time on the due date. If you mail your credit card payment, drop your payment in the mail far enough in advance so that your credit card issuer receives it on time. You can generally make an online payment on the due date up to the cut off time. Payment cutoff times vary by credit card issuer and can be found on your credit card issuer’s website.

Your credit card issuer may be willing to waive an accidental late fee, particularly if it’s your first time being late. Unfortunately, if you’re late more than once, your credit card issuer may not be as merciful.

Maximum allowed penalty fees have changed each year for the past few years. In 2016, the amounts were $27 for the first late payment and $37 for subsequent late fees within the next six months. In 2015, the maximums were $27 and $38. They were $26 and $37 in 2014.

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