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Paying your credit card bill may not be exciting, but it’s something you can’t avoid as a cardholder.
If you’re late with payments, it can cost you more than you think. Missing a credit card payment can result in additional charges like late fees, penalty APRs (higher interest rates), and negative impacts on your credit score. Nevertheless, there are strategies to stay on top of your bills and minimize the damage caused by missed payments.
How late payments can hurt your credit score
Late payments can negatively affect your credit score. If your credit card payment is just a few days late, it won’t harm your credit score. However, if your credit card payment is over 30 days late, your credit score can drop.
This happens because, after a 30-day delay, credit card issuers report the late payment to credit bureaus. These credit bureaus then include this late payment on your credit report, which is used by organizations like FICO to lower your credit score. Your payment history accounts for 35 percent of your credit score, so it’s essential to avoid late payments whenever you can.
How much late credit card fees can cost you
Late credit card fees can cost you a specific amount determined by regulations. The Consumer Protection Finance Bureau enforces limits on these fees, which are as follows:
- The first late payment can result in a fee of up to $28.
- For any subsequent late payments occurring within the next six billing cycles, the fee can go up to $39.
It’s important to note that the late fee can never exceed the minimum payment due on your credit card. In other words, if your minimum payment is $25, the late fee will not be higher than $25. This ensures that late fees are capped, preventing them from becoming excessively burdensome.
Ways you can avoid credit card late fees
To avoid late fees on your credit card payments, you can follow these simple steps:
Set up automatic payments
Setting up automatic payments is a straightforward way to make sure your credit card bills are paid on time each month. With this method, your credit card payment is taken directly from your bank account every month. You have options to pay the minimum amount due, the statement balance, or a specific fixed amount that you choose.
However, it’s important to note that even with automatic payments, you still need to be vigilant. If there isn’t enough money in your bank account to cover the automatic withdrawal, you may incur overdraft fees. So, while it simplifies payment, you should regularly monitor your account to avoid potential overdraft issues.
Set up calendar reminders
Setting up calendar reminders is a way to avoid automatic payments and ensure you remember to pay bills or complete tasks on time. You can use your calendar to schedule reminders for important dates, like payment due dates.
You have the flexibility to set these reminders for any time you prefer, whether it’s well in advance or just a short time before the deadline. Additionally, you can receive notifications via email or on your phone as the due date approaches. This method allows you to stay on top of your commitments and prevent them from catching you off guard.
Change your payment date
To change your payment date for your credit card, you can adjust the date when your credit card payment is due. If your current due date is causing problems, making it difficult to pay on time, you can request a new date.
You can typically do this online through your credit card provider’s website or by calling the customer service number found on the back of your credit card. This change allows you to select a more convenient time of the month for making your credit card payments, making it easier to manage your finances.
If you have multiple credit cards, consider whether it’s more convenient to have all of them due on the same date or spread out across different dates to better align with your budget and payday schedule. This way, you can make managing your payments more manageable.
By following these steps, you can effectively prevent late fees on your credit card payments and maintain a good payment history.
Locate the late fee warnings in the fine print
If you want to find out about the late fees associated with your credit card, you should look at the fine print. Your credit card statement, whether you receive it in the mail or access it online, contains details about late fees. This information is typically found on the first page of your statement, under the section labeled “Late Payment Warning.”
Additionally, the fine print may also alert you to the fact that making late payments can result in a penalty APR. This means that your credit card’s interest rate will increase. If you don’t pay off your entire credit card balance every month, having a penalty APR applied can cost you a significant amount of money. However, if you make on-time payments for six consecutive months, your interest rate should return to the regular rate.
Late Credit Card payment? Here’s what to do (appeal a late fee)
When your credit card payment is overdue, you might receive a late payment notification. This could result in a late fee, but it doesn’t necessarily mean your credit score will drop. To minimize the impact of a late credit card payment, it’s crucial to pay it as soon as possible. Sometimes, you can even ask your credit card company to waive the late fee. To find out what to do when you’ve missed a credit card payment, keep reading.
Pay your Credit Card bill immediately
Paying your credit card bill immediately is crucial to maintaining a good credit score. Here’s why:
- 30-Day Rule: Late payments are usually reported to credit bureaus only if they are at least 30 days overdue. This means that if your payment was due yesterday or even last week, and you pay it today, it won’t immediately harm your credit score.
- Timely Payment is Key: While immediate payment may not prevent all credit consequences, it’s essential to pay as soon as possible to avoid your payment becoming 30, 60, or more days overdue.
- Credit Report Impact: If a payment is accidentally 30, 60, or more days late, it can appear on your credit reports and negatively affect your credit score. The longer the delay, the greater the impact on your credit.
- Long-Term Consequences: Late payment records can stay on your credit reports for up to seven years, continuing to affect your credit score during that time.
- Minimum Payment: To minimize the negative effects of a late payment, it’s advisable to pay at least the minimum amount due right away.
In summary, paying your credit card bill immediately is a smart move to prevent late payments from harming your credit score in the long run. Even if a payment is slightly overdue, prompt payment can help mitigate potential damage to your credit.
Contact your Card issuer
When you’re late in paying your credit card bill, a few things can happen. You might be charged a late fee, and your interest rate could go up to what’s called a penalty rate, which is much higher than the usual rate. This penalty rate can be as high as 29.99% per year.
But here’s the deal: If you call your credit card company and explain why you were late and what you’re doing to make sure it won’t happen again, they might be nice and remove the late fee and the penalty interest. Here’s what you should talk about when you call them:
- Explain the situation: Tell them why you were late and what you’re doing to avoid being late in the future.
- Mention your payment history: If you’ve usually paid on time before, tell them. It might increase your chances of getting rid of the late fee.
- Talk about customer loyalty: Tell them how long you’ve been their customer and say that the high penalty interest rate might make you switch to a different card. They might want to keep you as a customer and do something to help.
Now, whether they’ll actually remove the fee and penalty interest depends on the situation. If they don’t, you can ask them how long you have to keep making on-time payments before your interest rate goes back to normal. You can also ask to speak with a supervisor to see if they can help you more. Just remember, if you don’t get rid of the penalty interest, it can cost you a lot if you keep a balance on your card.
Automate your payments
Automating your payments means setting up a system where your credit card bills get paid automatically. This helps you avoid late payments and the associated fees. To do this, you’ll link your bank account to your credit card account and make sure there’s enough money in your bank account to cover the payments every month.
Credit card companies usually offer different options for autopay. You can choose to have it pay the minimum amount due, the whole statement balance, or a specific fixed amount you decide on every billing cycle. Some may also let you split the payment into several smaller parts throughout the month, which can be more budget-friendly.
By following these steps, you can often have a late fee waived and take measures to prevent future late payments.
Why do late fees exist?
Late fees exist for two primary reasons:
- Protecting Their Bottom Line: Credit card companies charge late fees to compensate for the administrative costs and potential losses incurred when customers fail to make payments on time. These fees help ensure that the company remains profitable and can continue providing credit services to customers.
- Encouraging Timely Payments: Late fees serve as an incentive for customers to make on-time payments. By imposing a financial penalty for late payments, credit card issuers motivate cardholders to meet their payment deadlines, reducing the risk of accumulating debt and defaulting on the credit card.
It’s important to note that there are regulations in place to prevent excessive late fees. Credit card issuers are typically limited in how much they can charge, and they are required to inform customers of any changes to their late fee policies before they apply those changes.
The bottom line
Making late payments on bills or obligations is generally not a good practice. However, if you occasionally miss a payment due to accidents or forgetfulness, it’s not a catastrophe. To deal with this, be truthful with yourself about any disorganization or memory lapses regarding due dates. Then, take practical measures to prevent future late payments.