Credit cards can be a useful tool to cover expenses when cash is short or just to avoid carrying a lot of money when going out. However, Bills for what you charge need to be paid monthly or you run the risk of a small item becoming much more expensive than you bargained for.
When life gets hectic or your finances strain, you could 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 needs to be. There are some simple steps to take to remedy this situation and get your payments back on track with no extra fuss.
What to do if you miss a credit card payment
The first thing you want to do if you check your balance and see an “overdue” message in your payment history is not to panic, you’ll want to act immediately. First and foremost, If you can, pay your balance in full. If your finances are stretched, At least try to make the minimum payment immediately.
The sooner you get your creditor payment, the less harmful a late payment will be. This can include late fees, increased interest rates, and lowered credit scores.
You’ll also want to contact your credit card company. While you will most likely be charged a late fee for a missed payment, if you are in good shape and this is your first time, you can sweet talk to a customer service representative to waive it. Don’t hold your breath, but it never hurts to try.
What happens if you are late to pay by credit card?
Besides incurring additional costs through late fees and higher interest on your balance, Your credit score is at greatest risk if you don’t pay your bills on time. Fortunately, if you miss a payment but you can pay your balance before 30 days have passed, it won’t show up on your credit reports.
However, through that time, Every 30 days that you fail to make a payment will further reduce your credit score. This is important because payment history makes up 35 percent of the FICO Score model, meaning late payments can drag you down quickly. Also, The higher your credit score, the more you will be penalized.
If your financial institution gives up trying to get you to pay them back, they will turn over the debt collection work to a collection agency. This does even more harm to your credit score. Generally this happens after six months but there are no set rules and it is up to your credit card issuer when they call the debt collector.
Lost credit card payment late fee
The simple fact of missing a payment will have two automatic consequences: late fees and increased interest. The former is usually between $20 and $40, but there are limits set forth by law.
Under the Credit Card Disclosure and Accountability Act of 2009 (CARD Act) The first late payment fee cannot exceed $30 as of January 2022. However, if, after that late payment, you make another late payment within the next six payment cycles, Your credit card issuer may charge you up to $41 for each subsequent late payment.
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 rates for missed credit card payments
Missing a credit card payment can also send your interest rates soaring. Your financial institution can impose an APR penalty as soon as you miss a payment that will apply to future purchases. You may also lose any interest rate promotions you already have with the issuer. During that time, a higher interest rate may also be applied to the rest of your balance.
Again, you’ll want to talk to your issuer’s customer service department to find out See if you can get your interest rates back to a lower level. Paying as soon as possible establishes goodwill but there is no guarantee that they will pay immediately. If they say no, try again after you’ve paid on time over the six-month period.
