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Could Your Creditors Be Encouraging Late Payments? [And Reaping The Rewards Of Late Fees Because Of It?] -plus- How You Can Prevent Getting Popped With Extra Charges -plus- Do You Run With Scissors? -plus- Are The Banks Helping To Protect You...Or Are They Setting You Up For Failure?
February 6, 2003
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Dear Ben: Heads up, Ben. I'm in the printing business, and suggest your readers pay special attention to how their credit card payment coupon is supposed to line up with/through the address window in the return envelope. Many times, the envelopes are made incorrectly, or the statement coupon is sized wrong. Either way, if the address is partially hidden this will cause delays in getting the payment posted. The end result? Late fees, of course! Personally, I suggest ignoring their instructions to not staple through the check and the envelope. That way, the address is sure to stay visible. So what if it causes "extra work" on the part of the credit card posting department? If they want their money, let them do the extra work. This happened to me with a couple of major credit card company bills recently...and these weren't isolated incidents, either.
Greg in Dallas
Dear Greg: That's really good advice, and you've touched on an important point. Always make sure you can clearly see the name/address through those window because as you so astutely observed, the credit card company on the receiving end won't blink twice when it comes to popping us with late fees. In fact, their profitability depends on the income generated from late, over-limit and returned check fees...so unless you're a shareholder, why help them out?
The "do not staple" warning is always printed conspicuously on the return portions of your credit card billing statements because these big companies always have automated sorting equipment opening/sorting our checks and payment coupons. But the Post Office has automated sorting equipment too...and if the return coupon doesn't line up through the little window in the envelope properly, the payments get there late and we get to spend an extra $25 or more for that privilege. I've got two solutions:
#1: While I'd never encourage you staple their precious envelopes, if the entire address isn't clearly visible through the window in the envelope, line it up and use a little piece of tape to help keep it in place...or even a staple if you're one of those thrill-seeking types that likes to really push the "envelope" [no pun intended] in life. (You know who you are: You're the wild ones who run around the house with scissors..or drink milk that's a day-or-two past its expiration date.) Or...
Solution #2: Pay your bills on-line and direct through your creditors' websites. It's pretty safe and incredibly simple. Just make sure you don't wait until the last minute. Because of processing times, always pay your bill on-line at least two business days before it's due.
Speaking of encouraging extra (unnecessary) fees: Several national advocacy groups are trying to get the Federal Reserve to go after banks and other financial institutions for what appears to be "abusive, fee-based overdraft programs." According to a recent release from The Center For Responsible Lending, a consumer action group based in Durham, NC: "More than 1,000 banks and other financial institutions now offer programs that charge fees to cover check or ATM overdrafts, but they are not required to disclose their true cost as loans to consumers. The new programs pay overdrafted checks and charge a flat fee (typically $20 to $35) for each overdraft, equivalent to 1,000 percent interest or more on an annualized basis, instead of the annual 6 to 18 percent interest typically charged by banks on lines of credit to more established customers."
Dose of Dover For The Week: Over a thousand banks are getting publicly flogged for simply wanting to provide a service to those customers that can't seem to balance their checkbooks. Do I think their fees are outrageous? When you boil them down to an Annual Percentage Rate-type comparison, you bet they are. But what's worse? Bouncing a check you've written for (pick one or more): Rent/house payment. Car payments or repairs. Phone bills. Grocery or drug stores. All of the above/some of the above? It doesn't matter: You'll get slammed with bounced-check fees on either side of the transaction, so what's worse? It's all the same...but there's an easy solution! Quit whining, get off your lazy butt(s) and balance your checkbook every month. (Or be prepared to suffer the financial consequences.)
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