Credit Cards: Late Payment Fees and Penalty Interest Explained

It happens to the best of us. In the rush of a summer vacation or the holiday season, we end up overlooking a credit card bill. Next thing you know, you are hit with a late payment fee of 20 or 30 francs. Missing credit card payment happens easily enough, and having to pay penalties on top is frustrating. 

In this guide, moneyland.ch lists the late payment fees charged by Swiss card issuers, and explains the steps to take to avoid these unwanted costs.

Which costs apply when I pay my credit card bill late?

When you use a credit card to pay, the purchase is made on credit. At the end of each month, your credit card issuer sends you a bill for the total of payments made over the past month.

From the time that you receive your credit card bill, you must make at least the minimum required payment within a certain grace period. The grace period varies between card issuers, but is typically either 20 or 25 days.

If you have not paid your bill by the due date on which the grace period ends, your card issuer may charge you two different penalty fees.

• Late payment fees

A late payment fee, or simply a late fee, is a fixed penalty fee that your card issuer may charge you when you do not pay your credit card bill by the end of the grace period.

• Penalty interest

If you fail to make at least the minimum required payment by the due date, you may be charged penalty interest in addition to late payment fees. Penalty interest rates vary between card issuers, but are normally identical to credit card interest rates for carrying a balance.

Do I need to pay my credit card bill in full?

You normally have the option of either paying your credit card bill in full, or paying just part of the bill and carrying the rest as a credit card loan. However, you always have to make at least the minimum required payment. You can find an overview of minimum required amount, by card issuer, in the guide to carrying a credit card balance.

If you do not pay at least the minimum amount required, your card issuer will send you a late payment reminder. Additionally, your issuer may also charge you a late payment fee or administrative fee. Some card issuers already charge a fee with the first late payment reminder. Others only begin charging late payment fees from the second reminder.

Tip: If you are charged a late payment fee, a good first step is to contact your card issuer’s customer services. In the best case, they may be accommodating and waive the penalty fee.

How can I avoid late payment fees and penalty interest?

You will not be charged penalty interest or late fees if you always pay your credit card bill on time. But there is always a chance of overlooking a bill or forgetting to pay it. You can avoid this risk completely by doing one of the following:

• Set up a direct debit order: With a direct debit order, your card issuer automatically draws the full amount required to pay your bill from your private account.
• Use eBills with a standing approval: If you use online banking and eBills, you can add a standing approval for eBills from your credit card issuer. Your bank will then automatically pay your credit card bills directly from your private account.
• Deposit money into your credit card account: You can pay money into your credit card account in advance to create a positive account balance. You can then use your credit card just like a prepaid card, spending only your positive balance.
• Use a standing order: Have your bank set up a standing order to automatically transfer a certain amount of money to your credit card account every month around the time that you would receive your credit card bill. This ensures that at least the minimum required payment is made on time each month.

If you find that it is difficult for you to pay your credit card bills in full and on time, you should consider terminating your credit cards and using only debit cards or prepaid cards.

With prepaid cards, there is no risk of being charged late fees or penalty interest for spending, because you cannot make purchases on credit. Using a debit card instead of a credit card also prevents this risk, because purchases are charged directly to your private account. 

More on this topic:
Find the right Swiss credit card for your needs now
Swiss credit card interest rates compared
Account overdrafts explained