April 28, 2020
If you’ve ever paid your credit card bill late, you’re not alone. Twenty-six percent of Americans made a payment that was at least 30 days late in 2019, according to NerdWallet’s 2019 Consumer Credit Card Report.
Whether you’re having financial difficulties or just forgot to pay your bill, your wallet and your credit could take a hit if you don’t make your payments on time. Here’s how.
If you don’t pay the minimum due by the date on your statement, the credit card issuer will typically charge you a late fee. Under federal law, your credit card company can charge you up to $29 after your first late payment and $40 if you pay late more than once in six billing cycles. That means if you pay late just three times each year, you could be on the hook for over $100 in late fees.
In addition to being charged a late fee, you’ll also have to pay interest—or more interest—on your credit card balance. Even if your credit card has a grace period, if you don’t pay your balance in full by the payment due date, the outstanding balance starts accruing interest. And that’s not all. If your payment is at least 60 days late, your credit card company may be able to raise your interest rate, or APR, by charging you a penalty APR.
The penalty APR can be applied to your existing balance and remain on your account for at least six months, which means you’ll pay even more in interest if your card doesn’t have a grace period or if you carry a balance from month to month.
Depending on how late your payment is, your credit score could take a hit. If your payment is 30 or more days late, the credit card company will typically report it to the three major credit bureaus. Since your payment history has the most significant impact on your credit score, missing a payment could lower your credit score. In fact, a single missed payment could lower it by 100 points!
If you’re able to bring your account current before it is 30 days past due, your credit shouldn’t take a hit. But, as the two previous points suggest, you’ll likely still be charged a late fee, and the card issuer could raise your interest rate. To keep your account current, you must pay at least the minimum due by the payment due date. Even if your payment is on time, if you pay less than the minimum, your account will still be considered past due.
If the card issuer reports your payment as late to the credit reporting agencies, it will stay on your credit report for up to seven years, but its impact should diminish over time. If your account remains past due for 180 days, it’ll typically be charged-off by the credit card company and your account will be closed, which should be reflected in your credit reports.
While late payments can happen to anyone, it’s a good idea to be proactive and take steps to avoid paying your bills late. Here are a few ideas to follow to ensure your payment reaches the credit card company on time, every time.
If you’re paying late or missing payments because you’re having financial difficulties, your credit card company may be willing to work with you. It never hurts to give them a call and ask because all they can do is say no. They may be willing to work with you because, believe it or not, they don’t want you to fail. Their primary business model is to grant credit, collect payments, and make money, not write off accounts and lose money or collect pennies on the dollar.
If you need extra support, consider seeking help from a nonprofit credit counselor who can help you develop a holistic approach for navigating your financial challenges. Your counselor may work with creditors on your behalf and set up a debt management plan to help you get your finances back on track.
Regardless of why your credit card bill is late, not making your payments on time can have short- and long-term effects on your credit and your finances as a whole. It’s essential to get at least your minimum payments in on time, every time, so you don’t get charged additional fees and interest, experience a reduction in your credit score, or even have your account closed.
Jennifer Brozic began her writing career at seven years old, when she scribed the epic tale of her kite-flying (and skyward-looking) uncle crossing paths with a deep hole in a sandy beach. After earning a degree in journalism, Jen worked in the insurance and financial services industries before earning a master’s degree in communication management. She left the nine-to-five corporate world in 2010 and has been freelance writing ever since. Her areas of expertise include insurance, financial planning & budgeting, and building credit.
Many of us have done it. It may have been a simple oversight and we just forgot to take care of it on time. Or perhaps times were tough and we didn’t have the money. But, no matter what the reason for missing a payment or making a late payment on your credit card, there are typically repercussions. In fact, a single late payment of no more than 30 days late on your credit card could lower your credit score by as much as 100 points.
According to a July 2020 poll by Creditcards.com, 62% of those with credit card debt surveyed said they didn’t think they’d be able to make their minimum payment within three months because of the coronavirus pandemic. And even before the pandemic was in full swing in the U.S., a WalletHub survey revealed that 46 million Americans expected to miss at least one or more credit card payments in 2020.
There are plenty of articles out there touting why you should pay more than the minimum amount due on your credit card statement each month. And, yes, if you’re trying to pay off a credit card balance as part of a debt-reduction strategy, making more than a minimum payment each month is an important part of such a plan.