What is the penalty charged by lenders when cardholders do not pay at least the minimum monthly payment by the due date?

• A. Late fee
• B. Annual fee
• C. Overlimit fee
• D. Cash advance fee

Answer: (A)

Missing the minimum payment by the due date triggers a late fee. This charge is meant to cover the extra risk and administrative cost of a late payment and is usually a fixed amount or a percentage of the minimum due. The other fees are for different situations: an annual fee is charged for simply having the card, an overlimit fee applies if you exceed your credit limit, and a cash advance fee is charged when you borrow cash with the card. So the late fee is the penalty specific to paying late.