One of the best ways to build a good credit score and accumulate wealth is to manage your credit card effectively. Consistent, timely payments will prove to lenders that you are a trustworthy steward of their money, and displaying that will make them more inclined to lend you more cash on better terms.

Unfortunately, many people have learned all too well that as beneficial as credit cards are, overuse and late payments can severely harm their financial lives. Failure to pay on time often results in costly late fees, which if you weren't able to pay your initial balance in the first place, will probably make keeping up with your payments all the more difficult.

Many banks offer credit cards at a variety of interest rates and conditions, and late fee amounts will vary from bank to bank. Because of that, it's important to do your research and find the best deal possible. Wells Fargo is one of the largest banks in America, lending to over 10% of small businesses, and they offer multiple credit card options that may be right for you. We'll take a look at each of their credit cards, how much the late fees are, how they're incurred and how you can avoid them.

Wells Fargo credit card types

Wells Fargo offers three primary credit cards: the Propel American Express® card, the Cash Wise Visa® card, and the Platinum Card. There are a few differences between the three, but the late fee amount is the same for all of them. All Wells Fargo credit card late fees are up to $37, and may be lower depending on several factors.

How a late fee is calculated

Each year, the Consumer Financial Protection Bureau sets a limit on how much a credit card company may charge in late fees, adjusting it according to inflation. As of January 1, 2020, late fee maximums were set at $29 for the first charge, and $40 for the second—both of which were a $1 increase from the previous year.

The fact that the greatest late fee possible is $29 for a first–time offense and $40 for a second doesn't necessarily mean that that's what you'll be charged; it may actually be less. Credit card companies are not allowed to charge more in late fees than the balance itself, so if your minimum payment due is less than this, the corresponding late fee must be also.

The average late fee charged by any credit card company is about $36, so the Wells Fargo credit card late fee is on pace with most lenders.

When you'll be charged

Most credit card companies have a grace period of some sort, but they are not required to have one at all. A grace period is the amount of time between the end of your billing cycle and the due date, and is the amount of time you have to pay your bill once the billing cycle closes. When your grace period has expired, you will be charged a late fee.

Credit card companies themselves do not set grace periods; these are established by the banks that issue them. The average grace period is 21 days, and for all Wells Fargo credit cards the grace period is 25 days, so in that way Wells Fargo beats the average bank.

Effects on your finances

Paying your credit card bill late has several harmful effects, and they are the same for any credit card you use. Here are three:

• Greater cost - $37 is no small expense for most Americans, especially for those in difficult financial situations.
• Lowered credit score - Making timely payments accounts for 35 percent of your FICO credit score, so if you end up getting charged a late fee, your credit score is very likely to take a significant hit. Though extreme, a 90–day late payment by a payer with a previously high credit score can result in up to a 180–point drop in their credit score, and the impact is greater for repeat offenses.
• Higher APRs - Loosely defined as the total interest you'll pay on your credit card over the span of a year, your annual percentage rate may increase to a penalty level if you're more than 60 days late on a payment. Even if this does not occur, the APR for Wells Fargo credit cards ranges from 14.49%–24.49% depending upon the card and your creditworthiness, so if your credit score decreases as a result of late payments, you can expect the amount of interest you pay to rise.

Solutions to late fees

The simplest way to avoid late fees is to pay your credit card bill on time. Unfortunately, that can be easier said than done, so here are a few tactics to help you make regular timely payments, and boost your credit score in the process.

• Sign up for autopay - Having your credit card payment automatically deducted from your checking account on a given day of the month will ensure that your payments are made on time, eliminating penalties that could have been avoided. The disadvantage of automatic payments is that you must have money in your account on the day the payment is scheduled to be made; if you don't, you'll incur an overdraft fee.
• Make incremental payments - If you can't afford to pay the entire minimum balance at once, try paying a small amount each week. This will make your payments more manageable, and although it's less convenient than a single monthly transaction, it can help you get in the habit of making regular payments.
• Ask for a waiver - Life happens sometimes, and creditors understand that. If you have a history of being a reliable payer, you may be able to ask them to waive your late fee, especially if you're only late by a day or so. Our financial health platform can also help you get late fee refunds automatically.

Overview

In that they present both an opportunity to build up your credit score if used properly and a risk to harm it by mismanagement, credit cards are both an asset and a danger. The Wells Fargo credit card is no different, and with reasonable APRs, a 25–day grace period, and a $37 late fee charge, this particular lender may have the credit card terms that best suit you. To avoid the $37 late fee, be sure to pay on time, perhaps by autopay or incremental payments, and request a Wells Fargo late fee waiver if you typically pay on time and are only late by a few days. Making timely payments will pay off in the end with an improved credit score and better lending terms, but failure to do so can significantly damage your financial outlook.

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