What Happens When My Credit Card Payments Are Late?

If you are late making a payment on your credit card it can cause you a great deal of worry and concern. But it can also cause you to accrue charges and fees will increase the amount you actually owe the card issuer.

Making late payments on a credit card, even if it's just one day late, can affect your financial stability for an extremely long time as it has an adverse effect on your credit score, even if the payment is eventually made.

Late Fees And Interest Rates

Creditors will always charge a late fee for any payment that is not made by the expected payment date. Your future month's statement will show the fee included for a late or non-payment. Late fees vary from bank to bank and will be added on to the amount owing every month that the payment is late.

It is usual for the interest rate on your credit card to be increased in the case of late payments. The increased interest will become the default interest rate which is higher that the usual APR (annual percentage rate). This rate will have a knock-on effect as it will increase the overall amount of money owing to the card issuer, making it even harder to repay the money owed. If regular payments are maintained for several months after the default interest rate has come into effect, the rate will usually return to the APR you were paying prior to defaulting.

Credit Bureaus And Credit Scoring

When a payment is more than thirty days late or missed altogether the card issuer has the right to notify the major credit bureaus. This can mean that you will have a "black mark" against you in any credit score or credit report for possibly a few years, making it difficult to obtain future credit or finance on any purchases as your credit score will be lower than what it was before the late payment.

What Can I Do to Help?

The first thing you must do is not ignore the situation. This is important whether the missed payment is already late or if you know in advance that a payment is going to be late.

If you have always maintained a good account and made payments on time up until this point, contact your bank or card issuer. It may be possible for them to grant you an extension on the required payment. Explain that your payment is going to be late and reassure them that it is a one-off situation and that payments will return to normal from the next billing statement onwards. If necessary ask to speak to a manager.

If you have already missed the payment, ask the card issuer what you can do to help rectify the situation. Show them that you are willing to work with them in order to resolve the situation. If a bank can see that you are doing your best to pay the amount off they will be more willing to try to help you if they are able.

What if I Default Again?

If you are already in arrears with your payments and continue to be late making future payments or missing them altogether, the card issuer may have no other option than to close your account and pass it over to a collection agency. The collection agency will add further costs and fees to those already owed to the card issuer, as well as further interest charges, meaning the amount of money you owe will continue to increase until the bill is paid.