Americans know all too well how much it costs to use credit cards. The average household in the U.S. now has nearly $10,000 in credit card debt. Carrying such debt is fine, as long as you realize that there are costs associated with it. The interest rates arent particularly low and the fees charged for paying late or going over your limit can be steep. Late fees of $39 arent uncommon, and they are assessed if your bill fails to arrive by the due date, even if it was delayed in the mail.

The credit card companies have been listening to consumer complaints about expensive late fees and several of them have responded. American Express and Citibank have both recently introduced cards that are both advertised as having no late fees. There may be a twist involved; Citibankss Simplicity card carries no late fees as long as you make a purchase each month within the billing period. But no late fees? Arent late fees the card companys way of making sure that you pay your bill at all? What happens if you dont pay your bill?

Thats where the fine print comes into play. Your agreement requires you to pay your bill on time. With the Citibank card, paying late carries the usual fee of up to $39 if you pay late and havent made a purchase during the billing period. If you have made a purchase within the billing period, but you have still paid late, Citibank may, at its option, raise your interest rate. In fact, they can raise your interest rate as high as 23.99% above the prime rate. American Express will also raise your interest rate if you pay late twice in a year, though not as high as the 30% or so that Citibank will charge.

With interest rates potentially rising to nearly 30% and applying to your outstanding balance, youd be much better off keeping an existing card and paying the late fee than the hundreds or even thousands of extra dollars youd pay on a large balance after the penalty interest rate is applied. Of course, you can avoid both late fees and interest rate hikes by simply paying your bill on time and maintaining a small balance or no balance at all. If you want a card with no late fees, you probably already have one. Dont pay late, and there is no fee.