It can happen to the best of us. Amid the hustle and bustle of life, a missed credit card payment isn’t uncommon, even to the most financially savvy among us. Then you start wondering about late fees and late payments and whether a missed credit card payment will affect your credit report and so on and so forth.
Of course, there are genuine reasons to miss a card payment. Considering the year we’ve had with unemployment and reduced working hours, you may not have had enough balance to make the minimum payment. Or maybe there were some health conditions that forced you to miss your credit card payment.
Whatever the reason, it’s good to have an idea of what happens when you don’t or can’t make the payment and what credit card companies can do about it.
My payment is late. What can I do?
It depends on how late your credit card payment is and your credit history. Generally, credit card companies offer a grace period of 30 days for you to make the payment. If you fail to make the payment, then you’re looking at additional fees and interests.
In terms of long-term effect, missing a payment can also impact your overall credit score. This would make it difficult for you to secure loans in the future. So, if you realize there is a missed credit card payment, your options are quite simple.
Pay the Bill Immediately
The most obvious solution is also the most effective. If you can, make the payment immediately. You can either call your credit card company or pay it online. Even if you can’t pay it in full, try to make the minimum payment.
The earlier you pay, the easier it will be for you to avoid the late fees and additional interests. It will also ensure that your credit score remains unharmed.
Negotiate a Fee Waiver
Most credit card companies charge a late fee in case you miss a payment. This can vary from $25 to $40 depending on the card issuer and the card you have. What most people don’t realize is that the late fee is not set in stone.
If you’re a loyal customer of the company and have been making regular payments, you can call up the issuer. You can explain that it’s a one-off event and assure them that it won’t happen again. In some cases, if you present your case well, the company may waive your late payment fee and additional interests.
Here’s what to expect if you miss payments
You’ll have to pay a late fee, higher interest, and any other fee that the credit card issuer might charge. Importantly, it will impact your credit score. Remember that a faulty credit score will be a problem when you apply for everything from a personal loan to a mortgage.
What happens after 30 days
If you don’t make any payment for 30 days, your credit card company will add a late fee and interest to your outstanding amount. Additional fees might be imposed depending on the card issuer.
The late fee is not a constant. If you continue defaulting on your payments, they will go up in the subsequent cycles. From around $25, these can go up to $40. Additionally, even a single late payment can cancel any promotional interest rates offered by your credit card company.
The card issuer may also report your missed credit card payment to agencies for credit reporting.
What happens after 60 days
If you don’t pay for 60 days, you’re looking at exceptionally high interest rates on your outstanding amount plus late fee and additional late fee if applicable. Your annual percentage rate (APR) could climb to as high as 29.99 percent.
Credit card issuers usually use 60 days as the cut-off period to report a missed payment. This has the potential to be included in your credit card for up to seven years.
What happens when you don’t pay your credit card
For 90 days, your card issuer will get in touch with you. With additional interests and late fees, your amount would have substantially increased from what you owed in the beginning. This is your chance to negotiate with the company and explain your situation in case you’re unable to pay the amount.
So, what should you do if you have a missed credit card payment? The one thing that you shouldn’t do is not communicate with your credit card company. Most people ignore the emails and phone calls from the issuer, hoping that they’ll be able to take care of it in the next payment cycle.
In most cases, if the company’s satisfied that you’re genuinely unable to pay the amount in one go, they may offer a longer payment plan or even agree to reduce the interest rate. Depending on your payment history and association with the issuer, they may make the terms slightly easier and more convenient for you.
If you don’t pay and refuse to communicate with the company, they will close your account. Then, they will sell it to a debt collection agency. The card company won’t negotiate with you any further. The situation can even lead to wage garnishment and potential litigation.
How does missing a payment affect my credit score?
A missed credit card payment can affect your credit score and thereby your financial prospects. The primary reason is that in the FICO Score, 35 percent of weightage is given to your payment history. Importantly, missed payments can stay in your credit reports for seven years.
Making your card payments on time is one of the most effective ways to maintain a healthy score that will signal lenders to trust you. Most people don’t know that prospective employers, landlords, and insurance issuers can also check their credit scores.
This means that your credit score can play a major role in the kind of job you get, the place you rent, the house you’d like to buy, and the insurance premiums you may have to pay.
How to Avoid Missing Credit Card Payments
If you’ve been unemployed or have had to face health crises, it’s understandable that you may have missed card payments. But if you have a steady income, there are steps you can take to ensure that you don’t end up with a missed credit card payment.
Build Up an Emergency Fund
At the risk of sounding like your parents, here’s something you can do to improve not just credit card payments but your overall financial health: set up an emergency fund. As the name suggests, this is for emergencies only and not for impulse buying.
Start setting aside a specific amount every month and ensure that your emergency fund is enough to take care of your expenses for at least six months. This shouldn’t be used for monthly expenditure. You should only reach for it if there’s an emergency or if your credit card bills are too high.
Set up notifications or automatic payments
At times, you end up missing a payment because you simply forget it. The solution is to automate the process. You can set up notifications that’ll tell you that it’s time to pay. You can opt for text or email notifications to remind you of the due date.
Another way is to automate payments. You can set it up so that you make the payments by a particular date every month. You can either pay the minimum amount or your total outstanding amount.
What’s important here is to ensure that you have sufficient balance in your account to make the payments. You shouldn’t have to pay overdraft fees to make your card payments.
Make Multiple Payments Throughout the Month
This is another method to stay on top of your credit card bills. To avoid penalty APR and late fees, you can pay more than once a month. To begin with, you can set up your automatic payment to make the minimum payment by a given date.
After that, depending on your expenses for the month, you can make an additional payment. This will reduce your outstanding amount and decrease the minimum payments you’ll have to make later.
Delete saved card information
The best way to avoid missed car payments is by reducing your expenses. One of the smartest strategies to use is to delete your credit card information saved on websites and apps.
The next time you are about to buy something online or order food through an app, you will have to manually enter your credit card details. You may have to fetch your wallet, find your card, and then input the information. Those extra efforts may stop you from unnecessarily spending on e-commerce and apps.
Conclusion & Recommendations
A missed credit card payment once in a few months is nothing to worry about. But if it happens frequently, there are a few steps you can take. Other than notifications, automatic payments, and curbing expenditure, you can also request the credit card company to change your due date.
If your due date comes before your salary date, it’ll be a constant problem for you. Ensure that it’s after your salary date so that you don’t incur any overdraft fee with automatic payments.
Finally, the most important thing to do in case of a missed payment is to contact the issuer. The earlier you talk to them and explain your situation, the better it will be for you. The longer you wait or avoid the issue, the more problems you’ll have to face.
Frequently Asked Questions
Can I still use my credit card if I miss a payment?
You can use your credit card if you miss only a single payment. Your card will be active and your expenses will be reflected in the next bill.
Is there a grace period for credit card payments?
The grace period is usually for 30 days from when your billing cycle ends to the payment date. If you pay within this period, there will be no interest or fees.
What happens if I am 3 days late on my credit card payment?
Your late payment won’t be reported to the credit reporting agency before 30 days. This means that you should try to make your payment within that duration to avoid any effect on your credit score.
What happens if I miss one credit card payment?
The first thing you must do is get in touch with the company and explain the situation. Then you should make at least the minimum payment as soon as possible.