How to Calculate Late Fees

You need to make timely payments on all your bills to avoid the significant late fees that companies can charge.

Late fees are charges levied to the consumer related to payments made after the due date on a credit card bill or services bill, such as a cell phone. Late fees are dependent upon the terms and conditions set out by the company in your contract, although national and state laws limit the total amount you pay. Significant banking regulatory changes introduced in 2010 impacted late fees on credit cards, limiting the fees that credit-card issuers can charge consumers.

Things You'll Need

• Bill
• Copy of terms and conditions
• Calculator

Instructions

1. Pick the bill on which you want to calculate late fees, such as your credit card, cell phone or utility bill.

2. Read the terms and conditions related to the service, which will detail the fees charged on late payments. If you do not have this handy, order a copy from your service provider.

3. Count the number of days your payment is late. Unfortunately, certain companies, such as credit card providers, charge a flat fee even if the payment is one day late.

4. Calculate the late payment fee. This will either be a flat fee or it will be a percentage of the total amount owed to the company. For example, for a credit card, there was a $25 charge for the first late payment and $39 for the second late payment as of 2010. For a T-Mobile cell phone bill or a con Edison electricity bill in 2010, the late payment charge was 1.5 percent per month. If your monthly bill was $150, multiplying 150 by .015 equals a late fee of $2.25 for one month.

Tips & Warnings

• You can call the company's Customer Service Hotline to get a copy of the terms and conditions which will detail late payment charges.

• Laws limit the total amount of monthly late fees that companies can charge you. This limit is dependent upon the service and country.

• The 2010 Credit Card Act also states the late payment fee on your credit card cannot exceed your balance.

• Although in 2010 the Fed limited the flat fees that credit card issuers can charge their customers for late payments, companies are able to charge further late fees of up to 3 percent of the total outstanding credit card balance if consumers miss more than two minimum payments.

References

• Board of Governors of the Federal Reserve System: New Credit Card Rules Effective Feb. 22
• T-Mobile: Terms and Conditions
• con Edison: Example of a Monthly Residential Electricity Bill