We’ve all been there. You forget to pay your credit card bill on time, you’re out of town when the bill comes, or maybe cash is just a little extra tight that month. Whatever the reason, missing a credit card payment can get expensive.
How much is this going to cost me?
Your wallet will feel the missed payment in four ways, and how much it hurts all depends on how late you are. You may have to (1) pay higher fees, (2) pay a higher interest rate, (3) lose built-up rewards or (4) take a hit to your credit score.
If you are just a couple days late, you will probably just have to pay a late fee, along with interest on the . These late fees can be up to $40, but you should call your card issuer right away and explain the situation. If you make the payment and you haven’t missed any payments before this, they might waive the fee. The good news is that before 30 days, the late payment won’t cause your interest rate to go up yet, or your credit score to go down. Furthermore, it’s now illegal for other credit card companies to raise your interest rate just because you are late on payments for another issuer’s card.
If you are 30 days late or more, your credit card issuer might notify the credit scoring agencies (Experian, TransUnion, and Equifax), and that will negatively impact your credit score. The higher your credit score, the bigger the impact. A late payment can stay on your credit report for years.
Depending on your card’s terms and conditions, you could also lose out on any rewards you’ve built up. If you travel frequently or spend a lot, this can be costly.
The good news is the credit card issuer can’t raise your interest rate until you’re late by at least 60 days. They are also legally required to give you written notice 45 days before raising your interest rate. At that point, however, your APR will likely switch to a penalty APR, which will be a lot higher. And, you could be stuck paying the penalty APR for up to 6 months.
At 90 and 120 days late, your debt can go to a collection agency, and your credit score will plummet. If you do find yourself here, there are ways you can get out of debt. More on this in my next post.