1 Late Card Payment Has Harsh Consequences


NEW YORK (LowCards.com) -- Life gets busy. Every so often, a bill can get overlooked or paid late. It can happen regardless of your credit score or income level. But if you miss a payment on your credit card, there can be a big price to pay.

It does not matter what your credit history is or how long you have made on-time payments. If you miss making one minimum payment by the due date, you will likely get a notice that your issuer will charge a higher interest rate on future purchases. This can be accompanied by a late fee and lost reward points. A missed payment is an expensive mistake.

Here are some possible consequences from missing one minimum payment:

  • Late payment fee. The fee can range from $15 to $35 and will be added to your balance.
  • Interest charges. You will have to pay interest on your balance. This is quite a shock if you always pay your balance in full. The amount of interest will depend on the APR for your card.
  • Higher interest rates. If you have a late payment, you will be subject to a rate increase on new purchases, and the extent of the increase can be confusing.

Your issuer has to provide 45 days' notice of the increase and conditions and say when they start. The APR increase on new purchases can be as high as the penalty APR -- from 27% to 29.99% with most issuers. The new interest rate will apply for at least six billing periods, but if you make all six of these payments on time, the CARD Act requires your issuer to review your account and, if appropriate, reduce the interest again.

If your payment is more than 60 days past due, your issuer can give a 45-day notice and increase the interest rate on your existing balance. Again, if your make at least the minimum payments on time for the next six months, the issuer has to review your account and, if appropriate, lower your interest rate.

  • Lower credit score. Your issuer can report your missed payment to your credit reporting agencies, and this can pull down your credit score. Payment history accounts for an estimated 35% of your score, so if this missed payment was a one-time mistake in a good credit history, it should rebound.
  • Forfeited points. If you did not pay the minimum due by the closing of the next billing period, rewards, points or miles earned for that billing period might be forfeited.

    Capital One cardholders will lose any rewards applied to a balance during the billing cycle that contains a late fee. Some issuers charge a fee to reinstate the rewards. American Express charges $29 for each month of reinstated points or miles, once you have paid the minimum due. (Make sure the points are worth the fee. Points are worth about a penny for most credit card rewards.)

Avoiding the pain of missed payments
Here are six ways to either recover from a missed payment or make you less likely to miss one again:

  • Call your issuer and ask them to waive the late fee. Tell them you have been a good customer, and just made a mistake. There is a chance they will revoke the fee if you have a good payment history.
  • Set up automatic payments so you will never miss a payment or forget to pay your credit card bill.
  • Sign up to get payment alerts via email. These can serve as great reminders your payment is due in a week.
  • Pay on time. Issuers are required to review your account six months after instituting a rate increase. If you have paid on time for the subsequent six months, your APR could be restored to the original rate.
  • Ask for your credit card rewards to be reinstated. Your issuer may not waive the reinstatement fee, but it doesn't hurt to ask. If they don't, you have to decide if the rewards are worth the fee.
  • Create a certain location in your household where all bills are stored so they don't end up in your purse or your briefcase. Set up a specific day to pay them every week.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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