Loan Articles

You may think late card payments are nothing to worry about, but they are a big deal to your creditor. While you will not get a call if you are late a couple of days or a week, certain actions will be taken behind the scene. What creditors undertake against you is likely to affect your credit score long after you missed a payment or two.

If You Miss a Payment

There are several things happening. The first step the issuing company will make is to charge you a late fee. So, you will see the fee for the missed or late payment included in the next billing statement you receive. Late fees vary from one lender to another, but you can be charged as high as $35. How long will they charge you? You will be receiving a late fee for every month you are late on your payments.

The next thing to expect is see your interest rate increasing. It will usually increase up to the default rate, meaning that it will be more expensive for you to borrow, especially if you only make the minimum payment. The default rate is, in fact, the highest rate creditors charge, usually in the form of a penalty. The default rate can be quite high, reaching 30 percent in some cases. Normally, making six monthly deposits on time is required to lower the interest rate to the pre-penalty rate. If you make timely payments within twelve consecutive months, you may try to call the credit card issuer and ask them to refund the fee. This is not impossible and in fact, the issuer may do it as an annual courtesy. If you are late with less than thirty days, you will usually not be reported. However, you will lose some advantages, such as a balance transfer or introductory rate in case you opted for such a deal.

What can you do in this case? The best approach is to avoid carrying a balance. If you pay your balance in full every month, the consequences will not be that serious. If you carry a balance, you may want to set up recurring automatic deposits to your credit card issuer, be it a bank or a company. Set it up three to five days before the due date. This is wise to do because your due date may be fluctuating, and setting up payments early will make sure you won’t be late. While credit cards are convenient to have, they are still a responsibility.

What are Your Options

There are many ways to pay your balance - at banking centers during hours of operation, through an ATM, by phone, online, and through a transfer. While there are many options, what happens if you still are late? Banks usually inform their clients if a penalty APR applies after a late payment. One way to avoid the penalty APR is to avoid using your card account for making new transactions. Your account will be reviewed periodically in order to determine whether the interest rate can be reduced. In addition, your card issuer can offer the right solution if you are unable to make your payments on time. This will be based on your ability to repay and your financial situation. If you are late more than one month, it is best to discuss your options with the financial institution. One option is to change the due date so that it coincides with your payday schedule.

What is worse than having your rate increased? The credit bureaus will be informed if you are late more than thirty days. An entry is than to be added to your report, which will be cleared in 7 years. Of course, a single late payment will not affect your credit history and score so much as multiple missed ones.