What happens if you miss a credit card payment? This is a question that many people are curious about. We believe that anyone could have more likely missed a payment at some point in their lives. So, what occurs next, and what should you do to mitigate the effects? Let’s consult Hanfincal (hanfincal.com) to find out.
1. What happens if you miss a credit card payment?
1.1. You have to pay late fees
When you fail to make a credit card payment on time, you will be charged a late fee. Your first late fee may be as much as $28 or the amount of your minimum payment, whichever is less, according to state law. The first day your minimum payment is late, you may be charged a late fee. In case you make a late payment again in the next 6 billing cycles, it can cost you up to $40, depending on the late fee policy of your credit card.
1.2. Your interest rate will raise
When you are 60 or more days late on a payment, creditors may increase the interest rate to the penalty rate, your credit card’s highest interest rate on your account. However, credit card issuers may change your interest rate with 45 days’ notice while still allowing you to pay off your debt under the prior conditions.
1.3. Your credit score will be affected
Because your payment history accounts for 35% of your FICO credit score, late payments can impact your ability to obtain credit in the future. However, how much your score will fall depends on how frequently you pay late, and how serious or recent it is. Generally, the better your credit, the more scores you risk losing.
1.4. The late payment is added to your credit report
Aside from having an immediate impact on your financial institution, such as being charged late fees or APR penalties, a late payment can have a long-term impact on your credit history. Late payments will not be reported on your credit report if you manage to make them on time, usually, you have up to 29 days. So, if you’re less than 30 days late, you just need to make the payment plus the late fee. Once payment is more than 30 days late, the lender will report a missed payment to the credit bureaus, which can stay on your credit report for up to seven years from the initial delinquency date.
1.5. You may lose your credit card rewards
You may also lose your rewards points if you fall significantly behind your repayments. Some companies will refund your points if you pay the outstanding balance plus a fee. You may also need to contact the issuer online or by phone to request that your points be reinstated.
2. What to do if you miss a payment?
You already know what happens if I miss a credit card payment, so what should you do if you have late payments to keep the above consequences to a minimum? Here are three solutions to this problem.
2.1. Pay the bill immediately
If you accidentally forget or are late with any payments, try to pay them as soon as you remember. If the due date has passed, you may have been reported to the credit bureaus, and your credit score may have suffered as this result, but paying it back as soon as you remember can help reduce further consequences.
The first thing you should do is go online or call your credit card company and make a payment right away. The sooner you pay off your late statement balance (or make the minimum payment), the more likely you will be able to avoid inevitable consequences.
2.2. Negotiate a fee waiver
A fee waiver for loyal members is considered a gift and gratitude to credit card companies’ customers. However, not all credit card companies have it; therefore, read this policy ahead of time and do not disregard it if your credit card company has it.
A late fee for a missed payment is usually from $25 to $40—not a large sum, but enough to make a difference. If this is your first time with a late payment, you can persuade your credit card issuer to waive this late fee if you call its customer service line.
2.3. Don’t miss another payment
Missed payments should not be regarded as minor infractions, nor should they significantly impact your credit history. Missing one payment may not be a big deal, but if you make a habit of paying late, it can have serious consequences. Ensure you always make on-time payments to avoid as many effects.
3. How to avoid credit card late fees and penalties?
It’s time to limit what happens if you pay your credit card late. The four helpful tips listed below can assist you with this task.
3.1. Automate your payments
If you are a forgetful person and late payment is no longer unusual to you, it is time to find a way to limit this. Setting up autopay on your accounts is the simplest way to ensure you don’t miss another payment due date. You can usually choose a payment date and an amount to pay. Remember that you make sure you have enough money in the account from which the payment will be drawn to avoid an overdraft. Moreover, you could instead sign up for text or email reminders.
3.2. Build up an emergency fund
Why is setting up an emergency fund an excellent way to avoid late payments? This is indirect, but it is essential in limiting credit late fees and penalties. If you have your own emergency fund, you will use it for cash emergencies, restricting your borrowing and credit card use. When you keep your credit card usage to a minimum, your balance remains zero, and you don’t have to worry about late payments.
The size of your emergency fund will be determined by your earnings, expenses, and lifestyle. Try to set aside three to six months’ worth of expenses just in case. Once you’ve used this money and things have stabilized, make sure to replenish your account for the next time you’ll need it.
3.3. Change your payment due date
If you have many bills to pay a month, your due dates are probably spread out over the month. Paying all payments on time is quite challenging, and it more likely tends to increase your chances of missing a payment, so you should adjust your payment due dates as needed. It may be advantageous to have them on the same day or immediately after you are paid.
3.4. Make multiple payments throughout the month
You may want to make credit card payments at various points during a billing cycle. You can avoid late payments and lower your credit score by making at least the minimum payment. Then, if your finances allow, you can pay off the remainder of your balance over the month.
What happens if you miss a credit card payment? Before you panic, evaluate the situation and make the minimum payment on your account as soon as possible. The following step is to follow the sound advice above from Hanfincal (hanfincal.com). We are here to assist you and hope that you will be able to overcome your financial difficulties.
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