You will be able to explain why an interest charge or late fee appeared on your card statement and how to stop it recurring.
After fixing his savings account in lesson 3.1, Marcus went through a year of his credit card statements, expecting them to be clean, and most months were. But in three of them he found lines he didn't remember agreeing to: a late payment charge in July, a finance charge in August, and in October two lines from a weekend in Kuala Lumpur, one called a cash advance fee and one called interest. Together they came to more than he'd have guessed, and each had happened only once or twice.
Every interest or fee line on a card statement has a trigger. Once you know what each one means, you can work out what caused it and change the setting or habit that let it happen. This lesson covers the three you're most likely to find.
A late payment fee is charged when the bank doesn't receive at least the minimum payment by the due date, and that trigger is exact: the minimum on time avoids it, while the full balance a day late doesn't.
Marcus's July fee came from a work trip. His statement arrived while he was away, he paid it the evening he got back, and the payment reached the bank the day after the due date. The amount of the fee is set in the card's terms and listed in the bank's fee schedule, so check the current figure there.
A late payment does more than cost a fee. It can be reported to the credit bureau and show up on your credit report, and on most cards the unpaid balance starts to charge interest as well. Credit and debt: scores, cards, loans and BNPL covers how payment history affects your credit record.
A finance charge is interest. It appears when you don't pay the full statement balance by the due date. As lesson 3.2 explained, the unpaid part carries over and charges interest, and on many cards new purchases also start charging interest from the day you make them, until the whole balance is cleared.
Marcus's August finance charge followed directly from July. Because his July payment was late, his statement balance wasn't paid in full on time, and interest was charged. One late payment had cost him twice: the fee in July and the interest in August.
The interest rate is on your statement. To check a finance charge roughly, take the balance carried, multiply by the annual rate and divide by 12. It won't match to the cent, because banks calculate daily and from transaction dates, but it tells you whether the figure is in the right range. The card's terms explain the exact method.
A cash advance is cash taken out using your credit card, usually at an ATM, and it's one of the most expensive ways to use a card. There's usually a cash advance fee, and interest is charged from the day you withdraw, with no interest-free period at all, even if you pay your statement in full. The interest rate for cash advances can also be higher than the rate for purchases.
In Kuala Lumpur, Marcus's debit card wasn't working, so he withdrew the equivalent of S$300 from an ATM using his credit card. Here are example figures to show the cost. They aren't any bank's actual charges. Suppose the fee was S$15 and the cash advance rate was 28% a year. The interest for the 20 days until his payment arrived would be S$300 times 28%, times 20, divided by 365, about S$4.60. That's about S$19.60 to borrow S$300 for under three weeks.
Some transactions that look like ordinary purchases can be treated as cash advances too. The card's terms list them, and lesson 2.3 of Credit and debt, Cash advances, late fees and other costly card charges, goes into the detail.
Banks sometimes waive a late fee or a finance charge on request, particularly the first one, for a customer with a good record. There's no harm in calling and asking politely. Marcus did, and the July late fee was waived.
A waiver only covers the month you ask about, though, and the bank doesn't have to grant it. What stops the charge coming back is a setting that removes the trigger.
For late fees and finance charges, the strongest setting is automatic payment of the full statement balance by GIRO from your bank account. Most banks let you choose between paying the minimum and paying the full balance automatically. Choose the full balance. Then the payment arrives on time whether you're travelling, busy or forgetful. The only thing you need to watch is that your bank account holds enough to cover it.
For cash advances, the fix is a habit. Keep your credit card for purchases only, and plan for cash abroad in another way before you travel.
When you find a fee or interest line, write three things beside it: the date, the trigger and the setting or habit that would have stopped it. Marcus's list read: late fee, July, paid after due date, set up full-balance GIRO. Finance charge, August, followed from the late payment, fixed by the same GIRO. Cash advance fee and interest, October, ATM withdrawal on the card, use a debit card or carry cash instead.
So four charges came down to two fixes. In your own statements, the useful output is that short list of changes, and a year of statements is long enough to show it.
Find any interest or fee line in the past year of card statements and write what triggered it and the setting you will change to stop it.
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