What Happens When a Payment is Late/Missed?

A credit card is a contract. The contract states that you have to make at least minimum payments on time in return for the use of money. However, as much as 59% of people in today’s economy who have credit cards, admit to making at least one late payment.

So, what actually happens when you have a late or missed payment on one of your credit cards? Many things occur and none of them are good. Here is a list of them:

Fees: If you are late on a payment, chances are you will be immediately hit with a late fee. These are typically $35 or more. The fee is added to your bill and becomes part of your balance. That means that it’s susceptible to the same interest charges as your balance. Also, if you are close to the credit card limit, you could also be charged an over-the-limit fee establishing a cycle that can be tough to break.

Minimum Payments: It’s very possible that the late fees could increase your minimum payments.

Interest Rates: In the application you signed, the credit card company has the ability to increase the interest charges if you make even one late payment. This means that even if you’ve had a spotless payment record, if one payment is missed, your interest rate could increase.

Default Clause- A universal default clause is often found in the fine print of the credit card application. This allows the credit card companies to report your late payment to other credit card issuers. They can all increase your interest rate even if you haven’t made any late payments on their card!

Credit Bureau Reporting- Credit card companies report late payments (usually if it’s more than 30 days late) to the credit bureau. This in turn gets in your credit report which impacts your credit score. That’s because about 35% of your credit score consists of your payment history.

Calls- Calls from the credit card company to request payment will be made with increasing frequency.

Collections- If you are unresponsive to calls and notices, your account may be placed with a collection agency. This will also be reported to the credit bureaus.

After that, a lien can be placed on your assets and if you put collateral down on the loan or credit card, that could be seized.

It is a treacherous slope to slide down once you have a late credit card payment. It’s best that you try and work something out with the creditor to prevent damage to your credit history.