A late credit card payment is an easy mistake to make. You might forget the due date, fail to send the minimum payment or realize you never put a check in the mail.
Although a late credit card payment is an understandable error, there are consequences. A missed credit card payment can hurt your credit rating and finances both in the short and long term. But you can take steps to repair the damage and avoid repeating the mistake.
You Missed a Credit Card Payment. Now What Happens?
Late payments can trigger many adverse events. A late fee typically applies right away, and your late payment may be reported to the three major credit bureaus. You also may be subject to a penalty APR – the annual percentage rate – and lose access to earned rewards.
Here’s more on what you can expect:
Late fees. Your credit card bill will be sent to you at least 21 days before your payment is due. The gap between the end of your billing cycle and the due date is known as the grace period. You won’t be charged interest on card purchases you make at this time if you pay your bill before it is due. If you pay late, pay less than the minimum or don’t pay your bill, your credit card issuer will charge a late fee.
Maximum credit card late fees can range from $28 to $39, and the average maximum late fee is about $36, according to U.S. News research. The first time you are late, your credit card company can charge a fee of up to $28. If you miss two or more payments within six months, you could pay a late fee of up to $39.
Certain credit cards allow you to avoid some late fees. Usually, these cards waive your first late fee or don’t charge late fees. But these cards are the exception rather than the rule.
Credit score. Because payment history makes up 35% of your FICO credit score, a late payment can harm your credit rating. The effect on your credit score depends largely on your score before the late payment. Overall, a late payment can hurt higher credit scores more than lower credit scores.
A late payment can stay on your credit report for seven years from the original delinquency date. But the impact of a late payment will fade over time. Recent missed payments have a greater effect on your credit score than older ones. And missing several credit card payments within a span of a few months can be more harmful than missing a single payment.
With late payments, your FICO credit score factors in:
- Length of delinquencies
- Number of offenses
- Dates they occurred
- Amounts owed
The good news is you have a small window of time to make up a missed credit card payment before any damage to your credit happens.
“Late payments are typically not reported to credit bureaus until the payment is at least 30 days late,” says Leslie Tayne, debt resolution attorney and founder and managing director of Tayne Law Group. She notes that some creditors may wait even longer, allowing up to 60 days before reporting a late payment.
“In effect, there is a bit of a grace period as far as credit reporting is concerned, but not as far as negative impacts by the creditor themselves,” Tayne adds. “If you’re only a couple of days late, you’ll be able to make the payment before the 30-day mark without too much of a hit to your score. However, you may still get hit with a late (fee) from the credit card company.”
If your score drops after a late payment, just move on and do better next month. Your credit score can recover as long as you continue to make on-time payments. The sooner you get your account current, the better for your credit score.
Penalty APR. When you are more than 60 days late with a payment, your credit card issuer may increase your interest rate. You will be charged a penalty APR, and it can be as high as 29.99%. The average penalty APR is 27.54%. Issuers may keep the penalty APR in place for up to six months before reviewing your account to reduce the interest rate. They’re required to notify you in writing before a penalty APR applies.
A penalty APR makes carrying a balance more costly. You’ll pony up more for interest each month, so paying off your balance will take longer.
Credit card issuers were once permitted to increase your interest rate if you were delinquent on any other account, including accounts with other issuers. Federal law has eliminated this practice.
Often, a late payment will cause you to lose any promotional rate on the card, such as a 0% introductory APR on purchases and balance transfers. That’s important to remember if you’ve made a large purchase or balance transfer because you could owe interest.
Rewards. If you’ve earned rewards with your credit card, you may lose access to them while your payment is late.
“A creditor can freeze rewards on past-due accounts, reinstating only after the payments are caught up, and often with a reinstatement fee,” says Barry Paperno, a credit expert who has worked at FICO and Experian.
Calculating Late Fees and Interest
Late fees and penalty interest can add up quickly. A $30 late payment will grow to $34.79 at 29.99% APR for six months.
Depending on your balance, the damage can be even greater. You’ll pay $159.64 in interest over six months at 29.99% APR on a $1,000 balance. The same balance at 16.93% APR for six months has about half the interest at $87.69.
How to Avoid Credit Card Late Fees and Penalties
Simply put, do not make a late payment. Make paying on time easier by:
- Using automatic payments
- Setting custom payment due dates and choosing the same date for all bills
- Signing up for text or email payment reminders
- Planning days to pay bills each pay period
- Developing a monthly bill payment calendar
If you opt for automatic payments, make sure you pay at least the minimum and have enough money in your bank account to cover each bill. Most issuers charge a fee for payments returned because of insufficient funds, as a returned payment means your bill may not be paid on time.
Some credit card issuers will waive late fees and penalties if you ask.
“If you did pay late this month but have never paid late before, you can try to use that to your advantage to get the fee reduced or removed, particularly if your payment was barely late,” Tayne says. “Emphasize to the creditor your positive payment history and customer loyalty, and they may be willing to work with you.”
But even if you can get rid of the late fee, the late payment could still show up on your credit report.
If you’ve also triggered a penalty interest rate, ask the issuer for an account review to see if you can go back to your old rate. You may be able to after making on-time payments for a certain period, such as three to four months. If not, keep making payments on time each month so that during your next account review, the card issuer can revert to the old rate.