No one likes paying bills, but unfortunately it’s something we all have to deal with. And it can be easy to lose track of your credit card bills when it’s so convenient to use.
Paying your credit card bills is a no-brainer, and late credit card payments can have some unpleasant consequences. In this article, we’ll go through the results of not paying your credit card bill and the timeline around which they can occur.
1 Day Late – Late Fees
If you don’t pay your credit card bill in a timely manner, the card issuer may first impose a late payment fee.
Depending on your card and current balance, the fee amount may change. The federal Credit CARD Act of 2009, however, imposes a fee cap.
Your first late payment can cost up to $29, and each further missed payment can cost up to $40.
A late payment could result in the early termination of a promotional 0% APR (annual percentage rate), in which case you would be responsible for future interest charges on the balance of your card, including any fees that are added to your balance.
30 Days Late – Credit Score
Once your account is 30 days past due, a card issuer has the right to report your late payment to the credit bureaus.
The most central part of your credit score is your payment history, and a late credit card payment can harm your creditworthiness and lower your ratings.
Your overall credit profile will determine the precise number of points you lose.
The majority of points are typically lost by those with good to excellent credit after a new late payment. If a person already has a history of missed payments on their credit report, their score may decline as well, but probably not by as many points.
If you don’t bring your account current, the card issuer may continue to list it as being past due. Your credit report would reflect these adjustments and notes if you were at least 30, 60, 90, 120, 150, or 180 days late.
Late payments can remain on your credit report for up to seven years, during which time they continue to affect your ratings.
60 Days Late – Penalty APR
The card issuer has the right to impose a new, higher penalty APR on your account after 60 days, which will apply to your current debt and future purchases.
After making six consecutive on-time payments for at least the minimum amount due, you might be eligible to return to your normal APR if you bring your account current.
180 Days Late – Collections
The credit card company will probably believe it won’t get a payment on the account around the 180-day mark and will then charge off your account.
The company can deduct the unpaid bill from its earnings using this accounting method, but your obligation is not discharged.
Additionally, the credit card company might sell or transfer your account to a collection agency, which would then work to recover the amount.
By this time, late fees and interest charges may have significantly increased the overall balance over the original amount that was owed.
Your credit may be further harmed by the charge-off and collection account appearing on your credit reports.
Seven years after the first missed payment—also known as the date of first delinquency—when a series of missed payments results in a closed account, those payments and associated negative marks (such as the charge-off) will be deleted from your credit report.
Creditor Lawsuit
A creditor or debt collector may potentially file legal action against you at any moment to compel payment of an overdue payment.
If the creditor wins, it can receive a judgment granting it the right to take money out of your bank account or paycheck. Additionally, it might be able to place a lien on your home.
Don’t disregard a lawsuit that has been served on you; otherwise, the creditor can receive a default judgment in their favor. Even if the obligation is past the statute of limitations, this can still occur in some states.
If You Have A Late Credit Card Payment
One of the first things you should do is get in touch with the credit card company, whether you’re likely to miss a payment or have already fallen behind. It might be able to create a hardship plan for you with lower monthly payments.
You can also ask the issuer to reimburse the fees and interest imposed if you immediately make up the missed payment(s). Although it’s not required to, the company might be sympathetic if you’ve otherwise been a good customer.
You might also wish to speak with a non-profit credit counseling organization and inquire about a debt management plan if you’re having trouble managing many credit cards.
The counselor might be able to work out a deal with the card companies to get fees waived, monthly payments lowered and accounts brought current. The counseling organization will then receive one monthly payment from you and pay the credit card companies on your behalf.
The Bottom Line
Missing payments on your credit card can have a number of costly and credit-damaging effects.
To prevent this, however, you do not need to pay off all of your debt; making the required minimum payments on time will keep your account current and allow you to avoid fees, penalty APRs, and credit damage.
You can set up automatic payments for the bare minimum to prevent unintentional late payments if you have a good chance of having the money on hand.
Making a budget and tracking your income and expenses might also help you stop yourself from making impulsive purchases with your credit card.
Your best options may be to contact your creditors or seek assistance from a nonprofit credit counselor when you start to get behind if your problems aren’t the result of excessive spending.
As a current Mortgage Underwriter with 15 years of experience, I have seen my fair share of money-related issues. Whether that be high levels of debt, not enough credit, or simply a lack of funds - I’ve had clients who fit into these categories.
Here I will share tips, tricks, and experiences on how you can get yourself back in control of your finances.
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