Get Out of Debt Guy

Can Old Navy Really Charge Me Late Fees?

Posted August 11, 2013

WRAL Reader Question

Der Steve,

I went online to pay my Old Navy credit card on its due date. I noticed the amount was nearly double what it normally is. I looked at my bills and they charged me a late fee on my previous month's payment the day it was due.

Only I paid the bill on time. I went the next month previous (June) and found I missed my payment by one day. It was due on a Sunday, so I (wrongly) figured a Monday payment wouldn't matter.

I've never gotten charged a late fee within 48hrs of due date. Well, this time I got charged a late fee that I missed because it didn't show up on my statement as a past due amount for July.

Ironically enough I have no past due amounts on my current bill either just the larger amount due. When I called for an explanation, GE Retail Bank said they would remove the fees from my principal, but wouldn't decrease my payment for this month and then said if I didn't pay this month I would be reported as delinquent. When I argued that I hadn't technically missed a payment and the fees were coming off anyway,I asked them how I was being penalized. They had no answer.

How are late fees added to the principal credit amount owed if they are not credit, but administrative penalties? Is it standard banking policy to remove fees from principal and not the amount due or just this particular bank's policy?

Michael

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Dear Michael,

The due date gets us close to solving this but the most important factor is the due time on the due day. Different creditors have different cutoff times on the due dates. It's important to know if your payment was made after the due time on the day you made it. As an example, here is a previous credit agreement I reviewed that specifies the due time on the due date.

As far as the second payment, clearly the payment was late. As for the first payment, let's assume it was made after the due time.

So in that case, yes, you did make two consecutive late payments and the creditor can certainly report your payment performance to the credit bureaus.

In order to not be late I always suggest you make the payments due on the day you receive the statement and not try to time last minute payments. When people do you've seen what happens.

The creditor has removed the late fees out of courtesy and they are not required to do so. The late payments have most likely triggered a larger payment due because of added accumulated interest even though the late fees were removed. You would need to make the full payment due at the start of the current statement cycle to make sure your account was not reported as delinquent. 

While the late fees were removed, you also need to look closely at your statement to make sure the late payments have not increased your interest rate as well.

If you've never been charged a late fee if you made your payment within 48 hours of a due date, you are the exception, not the norm. Creditors make a significant amount of profit from late payments and fees. People are routinely charged them, even if they make their payment on the due date, but after the due time.

Steve Rhode
WRAL Get Out of Debt Guy

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.