Credit Card Late Payment Consequences
Missing a credit card payment can happen to anyone. Unfortunately, paying your credit card bill late can come with certain consequences, such as late fees, interest accrued on the credit card balance, and potential negative impacts to your credit score. The longer your credit card payment is past due, the more consequences you may experience.
Exploring the potential consequences of a missed credit card payment and solutions to help prevent this from happening may, therefore, help you avoid the negative financial impact of a missed payment.
When is a Credit Card Payment Considered Late?
As soon as you fail to pay your credit card bill by the due date assigned, it’s considered past due. If you miss a payment, your credit card company may send you notices about it in the form of calls, emails, letters, or texts.
In the chance you don’t hear from your credit card company, you may still face some financial consequences.
What Happens if You Make a Late Credit Card Payment?
The Credit Card Balance Could Increase
Even if you didn’t use the card to make new purchases during a particular billing cycle, making a late payment could increase your balance in several ways.
With even the first missed due date, the credit card company can charge a late fee of up to $28. If you miss another payment within the next six billing cycles, the late fee can go up to $39.
The silver lining here is that the late fee can’t be more than the minimum amount due on the account. Credit card companies typically calculate the minimum payment due on a set fee plus a percentage of the new balance for that billing cycle. So if you have a low balance, your minimum payment is likely to be lower than if you have a high balance.
There’s also a chance the creditor will increase your interest rate. For example, let’s say your credit card payment is 60 days late, at which time your credit card company may decide to increase your interest rate.
Increasing your interest rate will also increase your total credit card balance because that new, higher rate (generally referred to as a “penalty APR”) will apply to the entire unpaid balance.
Not all credit card companies have penalty APRs for late payments, so check with your credit card company to verify.
Your Credit Score Might Be Affected
Since your credit score includes information about your credit history, such as your payment history and the standing of your accounts, a late payment may negatively impact your score. However, the amount of time it’s impacted may vary.
Generally, creditors send information to credit bureaus using different codes to indicate if a payment is current or late. Since there is no credit code for payments that are one to 29 days late, they may use a “current” code.
Once the payment passes 30 days late, creditors generally use the “late” code, which is considered a delinquent payment. But different creditors will send different codes at different times so there’s no way to know for sure when you will see the late payment reflected in your credit report.
Creditors may not report a late payment to credit bureaus at all until a full billing cycle has gone by with no repayment (typically 30 days). With this in mind, if your payment’s due date was the 11th and you paid on the 13th, there’s a chance your credit won’t take a hit.
Although every situation is different, a late payment might end up staying on your credit report for several years. And because credit history is only one of the factors used to determine your credit score, it’s hard to predict exactly how a late payment will impact your score.
The Balance Could Be Charged Off
Another consequence of not paying your credit card bill is that the credit card company may not allow you to continue to use your card for other purchases until your account is in good standing.
Also, if your payment is 180 days past due, the credit card company can close your account and charge off the balance. “Charging off” means the credit card company will permanently close the account and write it off as a loss, but the debtor still owes the balance remaining.
Sometimes, credit card companies will attempt to recover what’s owed through their own collection department, but charged-off debts are sometimes sold to third-party collection agencies, which then attempt to get payment from the debtor.
Credit card companies do have leeway to work with their customers. Under FDIC regulations governing retail credit, the creditor can help customers who have had financial setbacks—like job loss or the death of a family member—get back on track.
This leniency is typically shown to people who are willing and able to repay their debt, and the FDIC encourages creditors to proceed with this step with a structured repayment plan and to monitor the progress of the plan.
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How to Resolve a Credit Card Late Payment
Paying it Right Away
If the payment just slipped your mind, don’t panic—there are a few solutions for tackling a late credit card payment. Contacting your credit card company when you realize you’ve missed a payment is a smart move.
Paying the credit card balance in full immediately helps avoid accruing interest charges and potentially saves your credit score from dropping. Alternatively, you might want to ask about arranging a payment plan to minimize the damage.
Even though your credit score may not drop because of one missed payment, you may incur late fees or an interest rate increase. Additionally, the late payment may result in a penalty interest rate (or, more accurately, a penalty APR as mentioned above), which will likely increase your total balance.
But, even if you do incur additional fees, sometimes credit card companies are willing to work with you to waive the fees.
Calling your credit card company to request a waiver of late fees could be a first step. If you’re unsure what to say when calling your credit card company, Experian suggests something like the following script.
“I missed a payment on my card recently, but I’m up to date now. Would you consider waiving the late fee? As you can see, I’m normally a good customer who always pays my bills on time.”
If the representative doesn’t seem willing to make any changes, you may want to request to speak with a manager. But if you’re not a repeat offender, credit card companies may be willing to waive fees.
Some credit card companies may not be as willing to waive interest increases. So, if your credit card company seems unwilling to change your rate back to the original amount, you might consider asking if they will do so once you show responsible payment history.
Automating Your Credit Card Payments
To help prevent any late credit payments in the future, one option might be to set up autopay to cover the minimum payment on your credit cards.
This way, if a payment slips your mind, you shouldn’t face any late payment consequences. Setting your bill to be automatically paid in full a few days before the payment is due can ensure you pay your balance by the due date.
If you would prefer not to sign up for autopay, many credit card companies have an option to sign up for notifications that remind you when your payments are due.
Getting Out of Credit Card Debt
To avoid late credit card payments once and for all, you may want to consider solutions for getting out of credit card debt entirely. Strategies depend on your unique financial situation, of course, but here are several for getting rid of debt for good.
Budgeting to Get Out of Debt
First, you may want to put together a budget. Creating a budget can help you better manage your money so you know what you have coming in and going out.
You can use either a simple spreadsheet or a budgeting app to simplify your efforts. Once you have a handle on how much extra money you can put toward your debt, you may want to select a debt repayment strategy such as the snowball method or avalanche method.
With the debt snowball method, the focus is on paying off the smallest debt balance first and then moving on to the second smallest debt balance, and so on, while still making minimum payments on all debt. This type of method is meant to give a psychological boost.
The debt avalanche method tackles the most expensive debt first—the one with the highest interest rate. Since you’re starting with the most expensive debt, this strategy can be a big money saver.
Opening a Balance Transfer Credit Card
If your credit is in good standing, you may want to consider opening a balance transfer credit card as a solution. Usually, these types of credit cards come with low or 0% APRs for a certain period.
Some companies may offer up to 21 months of interest-free payments during the promotional period. But, while the introductory period might be interest-free, you may still have to pay a balance transfer fee between 2% and 3%.
Ideally, you would pay your credit card balance in full by the time the introductory period is over, which would allow you to avoid interest payments on the debt.
Keep in mind, however, many balance transfer credit cards have restrictions. For example, if you make a late payment, you may lose your introductory rate.
Another limitation may be that your introductory APR only applies to the transferred balance and all other transactions may have a higher rate.
Before taking out another line of credit, understand that it can impact your total credit score. Credit scores are calculated using several factors, including credit history and new credit, both of which could be affected when opening a new account.
Consolidating Debt with a Personal Loan
Another option may be to consolidate your credit card debt with an unsecured personal loan. Essentially, when you consolidate your credit card debt, you take out a loan to pay off that existing debt, then make payments on the one new loan.
There are several reasons for choosing consolidation to help eliminate debt. For starters, you might be able to get a lower interest rate with a new personal loan, which could enable you to pay off your debt faster.
For example, very few credit cards have fixed interest rates, and the average variable APR for credit cards is about 17%. In contrast, for a person with better-than-average credit, the average rate for a credit card consolidation loan is currently lower. Depending on how much you owe and what your credit score is, you could save some money.
But, it’s important to note that personal loan rates and terms will vary. The rates and terms an applicant is offered are usually determined by their credit history and other financial factors. Essentially, different borrowers may qualify for different rates. With this in mind, consolidation might only be ideal for those in good financial standing.
With SoFi, It takes just a few minutes to check eligibility and possible rates—and there’s absolutely no obligation to continue if you don’t wish to. Applying for a personal loan can be a useful step to help you regain control of your finances.
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