> Because you are late on paying your entire balance
No, it is normal to carry a balance on a credit card.
The normal ("normal") way to use a credit card, before ubiquitous financing that seems to be everywhere today, is to allow you to buy something that costs a couple of pay periods, but instead of saving up and buying it later, you buy it now and pay it off gradually. It's the same way all debt is supposed to work (mortgages, business loans, etc).
You are still supposed to pay on time though, hence the late fee when you miss a payment.
Your comment sounds very strange to me, because it never occurred to me that credit card can be used to "buy something that costs a couple of pay periods".
I thought they are mostly for convenience, like when you can carry them instead of cash, or use them to pay in the Internet. But I always pay off the whole balance at the first occasion (irregularly, whenever I login to my bank website and notice the outstanding balance).
If you want to pay something off gradually, you usually have better options (car dealerships or shops selling electronics, and many others, they typically have their own credit offers, much better than your average credit card).
I think never in my life have I ever paid any interests on my credit card.
Individual shops like electronics, but before that department stores, etc offered charge cards (or charge coins) since the 1870's. Charge cards/accounts are distinct from credit cards because you settle the balance at the end of the period (month) and it's not revolving debt with an interest rate. Its more like Net 30 terms.
Diners Club card was introduced in 1950 as a multipurpose charge card, usable at a large selection of merchants.
Eventually banks got in the game in the 50's and 60's and that enabled true credit cards, which were like a charge card but you could carry revolving debt on them
The finance side of it is equally rich. Merchants did/do offer their own financing, with mixed results. Car dealerships did well, and eventually made so much money they spun off entities like GMAC (the GM financing arm), which now operates as a bank - Ally - because of regulatory requirements on deposits etc
The outcome of this proposed policy would be interest charges immediately, instead of being assessed monthly. It's not actually free to loan someone money... which is what happens when you swipe your credit card instead of your debit card and float the charges until the end of the billing period.
Wrong, I'm saying late fees are not an issue for anyone who makes on-time payments. They're literally called "late fees".
Heck, the late fees on my credit cards might as well be $1,000 per day or something - it doesn't matter because I make payments on time as a responsible adult.
Late fees discourage irresponsibility. That is why movie rentals had late fees, libraries have late fees, utility bills have late fees, rent, mortgage, and credit cards all have late fees. It encourages you to be responsible. Therefore, reducing late fees increases irresponsibility.
It's nothing to do with encouraging responsibility. The credit card companies are not benevolent uncles. They're doing it because they think it will make them more money through some mechanism and they are allowed to do it.
libraries and movie rentals had late fees because they can't rent out the same movie or book while you have it. Those require a different argument than mortage or other bills.
Arguably: because if customers keep movies past the due date, then it's not just that the video store can't rent it to someone else. It's also that the reputation of the video store will worsen, since other customers will find that they tend not to have good movies in stock.
(In other words, it's worth more to the video store to rent a film to two customers for one day each than to one customer for two days.)
So, the per-day opportunity cost to the video store goes up as each day passes.
Sure, they could just charge the customer an increasing per-day overdue rate. But that's basically the same thing as having late fees anyway.
That is what Redbox does now, you get one night and if you hold it longer they charge for more days, until they’ve charged you the full DVD price then you can keep it.
Libraries have most gotten rid of late fees because it didn’t do anything useful; only scared people off. (They still charge replacement cost of the book if you never return it.)
Because that would have a freezing effect: people would be so afraid of those late fees that they would prefer not to rent in the first place, because sometimes even with the best intentions you simply forget to return something on time.
So, setting the late fees is a delicate balancing act: you want them to be a bit scary, but no too scary to potential customers.
Where is the empirical evidence? You keep saying the same nonsense. Let's see it. Of course you won't produce anything since it's not true to begin with.
You’re asking for evidence that late fees are fees that are charged when one is late? It’s in every cardholder agreement. You don’t get charged a late fee if you aren’t late.
No - about the connection of responsibility and late fees. You can be responsible and incur late fees. Responsibility does not imply perfection or no mistakes.
Sure, banks have multiple revenue streams. They charge merchant fees per transaction, interest on outstanding debt, administration fees for some open accounts, interest on outstanding debt, etc.
I'm not saying I agree with all these fees or like the banking industry, but we can't just ignore some revenue streams because others exist. They all add up to a banks quarterly financial statements, and if one goes down they will do everything they can to make up for it in other areas.
If they want to collect late fees they should stop accumulating the interest. Of course they won't since that's the entire point.