A late fee is the charge the credit card issuer applies to your account if you fail to meet the minimum payment by your bill’s due date. Aside from being penalized with a fee, severely late payments can affect your interest rate and credit score. This can ultimately hurt your bottom line.
Americans paid a combined $561 million in late payment fees to electrical utilities in 2019. The fees account for a small part of major energy companies’ overall revenue — less than one-quarter of a percent on average — but for the people who must pay them, they can be crushing. Late fees typically punish customers who are least able to afford their utility bill to begin with. Poorly insulated homes and damage from natural disasters all contribute to poor residents spending larger portions of their paychecks on their energy bills. And Black and Hispanic households are more likely to experience energy insecurity and face utility disconnections.For those who fall behind, it often means choosing between paying for power and affording other necessities.
Power companies, including Entergy and Cleco Power, say late fees are an important tool to encourage customers to pay their bills. Ultimately, late payment policies are put in place to help protect all customers from potential rate increases caused by uncollected payments. The company doesn't profit from late fees.
But for some major utility providers, including Entergy, late payment fees make up far more of the companies' revenues than average. Nine companies, including Baltimore Gas and Electric, Central Hudson Gas and Electric, and Cleveland Electric Illuminating Co., derive more than 0.5% of their total revenue from late payment fee collection from 2011 to 2020 — double and even triple the national average of about 0.24%. Late fees are meant to cover the cost of collecting a bill, or the cost of disconnecting or reconnecting power to a residence.They're not meant to be punitive, said Odogwu Obi Linton, who sits on the board of directors of the National Association of Regulatory Utility Commissioners.
If a customer pays the bill quickly, the utility doesn’t have to carry or pursue collection of the debt, Linton said. This saves the utility company money on things like turnoff notices and making phone calls to collect late payments.
An overdraft fee is what a bank charges you any time you withdraw more money from your account than what you have in it. Overdraft fees can be a significant and unnecessary expense, particularly if you have to pay them often.
Overdraft fees are pretty easy to avoid if you take some basic precautions. Here are a few things you can do to avoid overdraft fees.
1. Opt out of automatic overdrafts- While overdrafts are meant to help you avoid embarrassing and inconvenient unpaid payments, you don’t have to accept the service.
2. Use an account that doesn’t charge you- Some accounts don’t charge overdraft fees. For example, SpotMe, a service from Chime, gives you the ability to overdraft your account by up to $200 without an overdraft fee.
3. Sign up for bank alerts- A simple way to help yourself avoid unexpected overdrafts and save fees is to set up an alert to notify you when your account balance falls below a certain amount.
4. Overdraft protection- It may sound similar, but overdraft protection is different from automatic overdrafts. With automatic overdrafts, your bank covers any overdraw on your behalf by automatically loaning you the money and making the payment. With overdraft protection, the bank will transfer money from one of your other accounts to cover an overdrawn amount.
5. Keep a cushion balance- Try keeping a little extra in your account to cover those forgotten or unexpected charges.