Uh-oh! You just received your credit card statement, and it shows large interest rates and fees that you didn’t expect. And in bold letters, you are informed that it is because you missed a payment.
At this point, several things may be happening to your account. Here’s a rundown.
1. You could be assessed a late fee. Most cards will charge customers a late fee when they make a late payment. In some cases, the fee will be a flat rate of up to $35. In other instances, the fees can be tiered. For example, the late fee for the Chase Freedom card can be up to $15 if the balance is less than $100, up to $25 if the balance is $100 to less than $250; up to $35 if the balance is $250 or more. So what exactly does “up to” mean? Federal laws now prohibit credit card issuers from charging late fees that are in excess of the amount due. So if you had a balance of only $12, then your late fee cannot be more.
On the other hand, there are now several cards offered that have no late fees at all, like the PenFed Promise and the Citi Simplicity. In addition, the Discover it card will automatically waive a cardholder’s first late payment. Nevertheless, these cardholders should not interpret a late-payment forgiveness policy as an excuse to pay late.
2. You may lose your interest-free grace period. Many credit card users avoid interest charges by paying their balance in full and on time. But when they fail to pay their statement balance on time, the interest charges are applied to their next statement in addition to any fees. In fact, interest charges are assessed based on your average daily balance for each day of the entire statement period. For those who have already been carrying a balance, the increase in interest charges will not be as dramatic, but it will be significant.
3. You may have a penalty interest rate applied. Not only are most cardholders hit with a late fee and additional interest charges, but a new, higher penalty interest rate will often apply when cardholders miss their payments. Thankfully, some of the same simple cards that have late fee waivers tend not to have penalty interest rates such as the PenFed Promise, Citi Simplicity and the Discover it card.
4. Your credit score could suffer. Making a late payment can hurt your credit, but it depends. It is up to credit card issuers how late a payment must be before it is reported to the credit bureaus, but any late payment can be reported. Thankfully, most credit card issuers will not report payments that are less than 30 days late, and some lenders may wait as long as 60 days before reporting late payments. (To see how your payment history is affecting your own credit, you can check two free scores on Credit.com.) However, just because issuers may not immediately report the late payment doesn’t mean is doesn’t exist. Your credit reports will show the payment history for all of your credit cards, so you can check them to see whether a late payment has been reported to the bureaus. You’re entitled to a free credit report once a year from each of the major credit reporting agencies under federal law.
What Can You Do If You Miss a Payment?
1. Pay it as soon as possible. The first thing you should do when you realize that you missed a payment is to make an immediate payment. The quickest way to make a payment is by phone or electronically, not by postal mail. Making sure the payment is received quickly reduces the likelihood that you will be reported to the credit bureaus, and increases the chance that the card issuer will be willing to forgive any late fees and interest charges.
2. Contact your credit card issuer. Once you have made a payment, cardholders who were otherwise in good standing will be in an excellent position to request that any late fees and interest charges be waived. Simply call your card issuer and let them know the circumstances that caused you to pay late, such as if you have not received your statement. In most cases, card issuers will be happy to waive these charges in order to satisfy and retain their customers.
3. Fix the problem. After you have done what you can to limit the immediate harm caused by a late payment, be sure to take steps to keep it from happening again. For example, if your statement wasn’t delivered in the mail, you might switch to electronic statements. In addition, many credit card issuers now offer payment reminders via text and email.
It’s only human to miss a credit card payment sometime; it is how we handle these mistakes that is most important.
At publishing time, the Chase Freedom, Citi Simplicity and Discover it cards are offered through Credit.com product pages, and Credit.com may be compensated if our users apply for and ultimately sign up for any of these cards. However, this relationship does not result in any preferential editorial treatment.
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
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Note: It's important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
Jason Steele has worked as a computer systems administrator, a commercial pilot, and a contributor to several of the top personal finance sites as an expert on credit cards and travel. He is a graduate of the University of Delaware with a degree in History. More by Jason Steele