Whether you're short on funds, dealing with an emergency or just feeling a little forgetful, you may miss a credit card payment at one time or another.
But no matter the reason, failing to pay your monthly bill usually comes with some unfortunate consequences.
When you miss a credit card payment, you will likely owe a late fee — typically between $25 and $50. If your payment is 30 days late or more, it will likely be noted on your credit report.
In addition, if you are more than 60 days late, then the credit card issuer may start charging you a penalty APR, which is a higher interest rate than what you currently have.
Paying late on a credit card with a promotional 0% APR offer could nullify the favorable terms. Your new interest rate will probably be significantly higher.
Overall, if you carry a balance on your account, higher interest rates will make paying down your debt more difficult.
After 30 days, a creditor may start the collection process. Many creditors have in-house recovery teams that will try and collect the debt. Or the balance may be sold to a third-party debt collection agency. In that case, you would have to pay the collection agency directly.
After six months the account may be charged off. This means that, while you still owe the full amount, the issuer writes the account off as a loss and closes the account. This action will also be reported to the credit bureaus.
The best way to handle this situation is to address it head-on. First, ask the debt collection agency for proof that the debt belongs to you. Once you’ve received that proof, you can try to negotiate with the collection agency.
If they agree to report the debt as settled on your credit report, offer to pay them a small portion of what you owe (10% of the original balance, for example). If they won’t accept less than the full amount, then ask if you can set up a small monthly payment plan.
If there’s no way for you to avoid paying late, contact the credit card issuer and let them know before you miss a payment. This action can show that you’re a customer in good standing with good intentions. The issuer may have some sort of late-fee waiver they can offer you as a one-time courtesy.
Or if you have a more serious life situation, like loss of a job, you can ask if a hardship program is available and enroll in that. Depending on the program, your credit score or credit worthiness (or both) could be affected. Make sure you understand the terms of the program first.
When you’re having trouble affording all your credit card bills, a personal debt consolidation loan with a longer term might be a good option. You could lower both your monthly payment and interest rates by doing this, but be sure not to run up the card balances again.
This page and the information contained herein is for educational purposes only. The information is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any product, service, or strategy to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any links to other websites are included for your convenience only. Bread Financial does not endorse any product or service, and is not responsible for the accuracy or reliability of the information, made available through such sites.
