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What To Do After A Late Credit Card Payment

January 28, 2021

Late fees are one of the reasons why we all worry about missing our credit card payment.

In this quick read, we’ll tell you exactly what you can expect to lose if you don’t make your payments on time.

We’ll also tell you how to avoid such a situation, or at the very least, how to handle it should it arise (and come out of relatively unscathed).

When do you incur late fees?

The first thing you need to know is that you’ll incur late fees not only if you don’t make payments before the due date, but also if you don’t pay the entire minimum amount due by the due date.

Let’s say your outstanding balance from your last billing statement is $1,000, the minimum amount due is $50, and the due date is October 31st.

In that case, you’ll be charged a late fee if you don’t pay at least $50 by October 31st.

So, let’s say you made a $40 payment towards your card bill by the due date.

In that case, you’ll still be charged a late fee because you didn’t pay the entire minimum amount due.

And what will be the amount of the late fee?

Well, as per law, the issuer can charge you up to $29 the first time you are late, or up to $40 if you’ve been late more than once during the last six months.

However, the late fee amount cannot exceed the amount of the minimum payment.

For example, if the minimum amount due on your last billing statement was $20, then the issuer can’t charge you anything beyond $20 for a late fee.

And what happens if you don’t pay your late fee before the next billing cycle ends?

Well, in that case, as your next minimum payment, you’ll have to pay the late fee, plus the regular minimum payment, plus any past-due payment from the previous billing cycle.

What are the other repercussions of a late payment?

In a simple world, a late payment would cause you to pay a late fee, and the matter would end then and there.

We all would like to live in a simple world, but unfortunately, that’s not the case.

When you make a late payment, you stand to lose much more than the late fee.

First off, if you are more than 30 days late, a late payment entry is added to your credit report.

Since payment history constitutes 35% of your credit score, a single late payment can pull down your score.

Of course, when that happens, you’ll find it more difficult to get approved for credit at favorable terms – for example, you may have to pay a higher interest rate on new loans that you take out.

So, a late payment can cost you in terms of late fees, lower credit scores, and higher interest rates on new loans.

Your interest rate on the current card may increase too – if you are more than 60 days late on your payment.

This gives the issuer the liberty to increase your interest rate to the penalty rate, making it very, very expensive to carry a balance on that card.

What’s worse is that the issuer may apply the penalty rate to any new purchases that you make using that card as well.

Also, you may end up losing any promotional rate offer you may have had on the card.

While you are late on your payments, the issuer may prohibit you from redeeming accumulated award points - or even forfeit them altogether.

Finally, if you are 180 days late on your payment, your account is charged off and that information stays on your credit report for seven years.

So, as you can see, the cost of a late payment is not as simple as a late fee. You stand to lose much, much more than that.

What can you do to avoid being hit by late fees?

The first answer is obvious – pay the minimum due on time!

If you are a forgetful person, set reminders on your calendar, set up auto-pay – basically do anything and everything that will enable you to make the payment before the cut-off time on the due date.

And what is the cut-off time?

It is the time on the due date by which you need to make the payment.

By law, the cutoff time cannot be before 5 p.m., and many issuers accept payments up until midnight.

If you mail your payments by check, make sure you do so well in advance so that it reaches the issuer by the due date.

If the due date is imminent, try making the payment through the issuer’s website or by calling a customer care representative over the phone.

Of course, if you are one of those people who always pays their bills on time but messed up just this once due to some unavoidable problem, you can request the issuer to waive your fee.

Call up the customer care representative, tell him/her what happened, and request that your fee be waived due to your impeccable record.

If you’ve been a good customer all along, many companies will accept your request and save you from bearing the repercussions of a late payment.

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