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A late credit card payment or missing one is an easy mistake to make, but it is a bigger deal than you think. There will be severe consequences of making late payments on a credit card. A missed credit card payment can hurt your credit ratings and finances both in the short and long term. But you can surely take steps to repair the damage and avoid repeating the mistake.
You missed a credit card payment, what will happen next?
If you have paid less than the minimum amount due or made the payment after the due date, then your credit card payment is considered late. Here’s what will happen if you pay your bills late:
If you do not pay your dues on time, your creditor will include a fee for the late/ missed payments in your next billing statement. Late fees are levied depending on your credit card’s late fee policy even it’s your first time being late in the last six months. You’ll be charged a fee if you pay late, pay less than the minimum, or don’t pay your bill. If you have been paying on time for a long time, the bank may allow you to avoid late fees.
Payment history makes up 35% of your credit score, which means late payments can hurt your credit score. This can further affect your ability to get a new loan or apply for credit card in the future. Plus, your credit card issuer will not report late payments to the credit bureau until after 30 days. So, you can make the payment along with a late fee within 30 days and avoid any damage to your credit report. If your credit score drops after a late payment, move on and pay on time from next month.
Late payment may cause you to lose some or all of the rewards you’ve accumulated till now.
Your credit card issuer may increase your interest rate if you are more than 60 days late in making the payment. You will be charged a penalty, and it can go as high as 29.99%. Your issuer is required to notify you in writing before a penalty APR applies. A penalty APR will make your due balance more costly and extend the amount of time it takes to pay off your balance. Depending on your credit card, purchases made after the penalty may still receive the higher rate. You cannot redeem your rewards if you frequently miss payments on your credit card.
Credit Card default
If you have missed the last six payments, the card issuer will typically charge-off the account or sell it to a third-party collection agency. The charge-off goes stays for seven years on your credit report. This will reduce your credit score further.
Tips to make sure you don’t miss credit card payments: –
Autopay can be beneficial for you if you forget to make the card payments by the due date. Autopay means that you authorize the credit card issuer or lender to automatically deduct your monthly payment amount directly from your account on the due date.
Set Up Reminders
You can effectively pay your bills on time by setting up reminders instead of relying on your memory.
Instead of paying monthly, it’s best to pay weekly on the account. This would help you to control your overall balances, and it will help you pay everything off a bit faster.
Hence, it’s essential to pay your credit card dues on time. This would help you to improve your credit score and will prevent you from paying high-interest rates and late fees. Additionally, you can apply for new credit when it’s necessary.