How to avoid late and overdraft fees
Editor's Note
Late fees and overdraft fees can serve as a significant source of revenue for credit card issuers and banks, often at the expense of consumers. In fact, Americans pay an estimated $12 billion in credit card late fees each year.
So, what exactly are these fees — and how can you avoid them? Here's what you need to know.
What are late fees?
Late fees are charged when you miss your credit card's minimum payment deadline. The exact cutoff time depends on your card issuer — some require payment by 5 p.m. Eastern time (the end of their business day), while others allow you to pay until midnight on the due date. If you miss the deadline, you could be charged a late fee, typically somewhere in the range between $20 and $40.
Related: How to save your credit score after a late payment
How to avoid late fees
To avoid late fees, make at least the minimum payment by your credit card issuer's cutoff time on the due date. Cutoff times vary — some banks require payment by 5 p.m. ET, while others allow until midnight, so be sure to check your issuer's policy.
Paying the minimum amount due will help you avoid late fees and other penalties, such as raised interest rates or annual percentage rates.
However, paying only the minimum amount due can lead to other expenses, such as interest on your credit card balance. The best way to avoid paying interest on credit cards is to pay your full balance each month.
If you’re worried about missing a due date, consider setting up autopay for at least the minimum amount to ensure your payment is always on time.
Related: TPG’s 10 commandments of credit card rewards
What are overdraft fees?
Late fees apply to credit cards, while overdraft fees are tied to your checking account. Overdraft fees occur when your account balance goes below zero — either because you spend more than you had, or because you withdrew funds that weren't yet available.
For example, if you deposit a large check that's placed on hold and then make a withdrawal before those funds clear, your account can be overdrawn. In these cases, banks typically charge overdraft fees — often around $35 per transaction.
These fees are similar to those charged for bounced checks, which happen when a check is returned due to insufficient funds in your account.
How to avoid overdraft fees
The simplest way to avoid overdraft fees is to keep your checking account balance positive and avoid spending more than what's actually available. But this can get tricky due to deposit and debit card holds.
Be mindful of deposit holds — banks may delay access to funds from large checks or other deposits, sometimes for several days. If you spend money before it's officially available, your account can go into the negative, triggering an overdraft fee.
Debit card holds can also tie up funds. For instance, hotels or rental car companies may place a temporary hold for incidentals. That money won't be available for spending or withdrawal until the hold is lifted, often days later.
Related: 5 things you need to know about debit and credit card holds
To avoid overdrafts, always check your available balance — not just your account balance — before making payments or withdrawals. And make sure you understand your bank's deposit availability policies to avoid surprises.
Related: 4 reasons why you shouldn’t use your debit card
Bottom line
No one likes paying extra fees – and the good news is, many are avoidable. By paying your bills on time, keeping an eye on your account balances, and understanding how deposit and debit card holds work, you can steer clear of unnecessary charges. Most importantly, try to spend within your means.
If you're finding it difficult to manage your debt, know that you're not alone. These resources may help:
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- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
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| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
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You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
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Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.