What happens if you are late on a credit card payment?

Credit cards can be a useful tool to cover expenses in a cash crunch or simply to avoid carrying a lot of cash when you’re out and about. However, the bill for what you charge must be paid each month or you could risk a small purchase turning out to be much more expensive than you expected.

When life gets hectic or your finances are tight, you may miss a credit card payment. Don’t panic, but sit down and take a minute to figure out the way forward to prevent the situation from getting worse than it has to be. There are a few simple steps you can take to remedy the situation and get your payments back without much ado.

What to do if you miss a credit card payment

The first thing you want to do if when you check your balance and see a “due payment” notice in your payment history is not to panic, but you’ll want to take action right away. First and foremost, if you can, pay the balance in full. If your finances are tight, at least try to make the minimum payment right away.

The sooner you can make a payment to your creditor, the less damage a late payment will cause. This can include late fees, interest rate increases, and a drop in your credit score.

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You’ll also want to contact your credit card company. Although you will most likely be charged a late fee for the missed payment, if you are ok and it’s your first time, you can sweet talk the customer service rep into dropping it. Don’t hold your breath, but it never hurts to try.

What happens if you are late on a credit card payment?

In addition to incurring unwanted additional costs through late fees and higher interest rates on your balance, your credit score is the most at risk if you don’t pay your bill on time. Fortunately, if you’ve missed a payment but are able to pay off your balance within 30 days, it won’t show up on your credit reports.

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However, past that point, every additional 30 days you don’t make a payment will further lower your credit score. This is important because payment history makes up 35 percent of the FICO score model, which means late payments can drag down yours quickly. In addition, the higher your credit score, the more you are penalized.

If your financial institution gives up trying to repay you, they will hand over the debt settlement work to a collection agency. This would further damage your credit score. Generally this happens after six months, but there is no set rule and it depends on your credit card company when you would call a debt collector.

Late fees for missed credit card payments

Simply missing a payment will have two automatic consequences: a late fee and an increased interest rate. The first is generally between $20 and $40, but there are limits set by law.

Under the Credit Card Liability and Disclosure Act of 2009 (CARD Act) the first late payment fee cannot exceed $30 starting in January 2022. However, if after that late payment you make another late payment within the next six billing cycles, your credit card company may charge you up to $41 for each subsequent late payment.

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But a late fee cannot be more than the minimum payment due on the account. The late fee limit is adjusted annually by the Consumer Financial Protection Bureau (CFPB).

Higher APR interest rates for missed credit card payments

Missing a credit card payment can also see your interest rate jump. Your financial institution may apply a penalty APR as soon as you miss the payment that would apply to future purchases. You may also lose any promotional interest rate programs you had with the issuer. Over time, that higher interest rate could apply to the rest of the balance as well.

Again, you’ll want to talk to your issuer’s customer service department see if you can get your interest rate back to the lowest rate. Making a payment as soon as possible will establish goodwill but there is no guarantee that they will do so immediately. If it says no, try again after making on-time payments for a period of six months.


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