When you charge something on your credit card, your credit card issuer expects you to pay it back. You don’t have to pay the entire thing back at once (though that’s better), but you do have to pay a portion of the balance every month.
Your credit card issuer will send you a statement each month that details your credit card balance, your required minimum credit card payment, and the payment due date. You must make at least the minimum payment by this due date to avoid serious penalties.
What Happens When You Make a Late Payment
Making a late credit card payment has several consequences, some of them more severe and costly than others.
You’ll be charged a late fee. Credit card issuers assess a late payment fee each time your credit card payment is late. Some card issuers charge a flat fee, like $39 for each occurrence. Other card issuers have a tiered fee based on your credit card balance. For example, you may pay a $15 late fee if your balance is under $1,000 or a $30 late fee if your balance is over $1,001. Information about your late fee should be printed on the back of your credit card statement.
If it’s the first time you’ve been late on your credit card payment, your card issuer may have mercy and waive your late payment fee.
Starting February 22, 2010, credit card issuers can’t charge a late fee if your payment was received late because of a recent (60-day) change in their payment mailing address. Also, if the creditor made a change in their payment processing system that resulted in your late payment, they’re not allowed to charge a late fee.
Your interest rate may increase. Credit cards typically have a penalty rate that goes into effect whenever you default on your credit card terms, for example making a late payment. The penalty rate (also known as the default rate) is often significantly higher than your regular rate. It’s common to see a default rate as high as 29.99%.
New credit cards that go into effect February 22, 2010, prevent credit card issuers from defaulting your credit card interest rate unless you’ve been at least 60 days late on your credit card payment. Not only that, card issuers will be required to review your payment history after six months and lower your rate if your payments have been timely.
The late payment will go on your credit report. Your credit card payment history is updated on your credit report on a monthly basis. Just as timely payments are included on your credit report, so are late payments. Late payment information remains on your credit report for seven years from the date it occurred. If you’re seldom late on your credit card payment and if you call your customer service department quickly, you may be able get your creditor to waive the late payment listings.
Your credit score may go down. Payment history is 35% of your credit score. In fact, it has the most impact on your credit score. A late payment that’s updated on your credit report will cause your credit score to fall. The more delinquent you are on your credit card payment, the more your credit score will be hurt. Fortunately, as late payments get older and you add more positive payment information to your credit report, those late payments hurt less.
Is It Ever Ok to Pay Late?
The quick answer is no, it’s never ok to pay your credit card late, not in response to a new fee introduced by your credit card company, not because your credit card interest rate has increased, not for any reason. The general rule is: pay your minimum payment by the due date or face the consequences. If you make a partial payment or send anything less than the minimum payment, you’ll still be considered less.
Exception for Billing Errors
You may be able to postpone your credit card payment if there is an error on your billing statement and you have notified your card issuer, in writing, of the error. You can only withhold payment on the portion of the balance that’s in question. So, if you’ve disputed your entire credit card balance, you don’t have to make a payment until the credit card issuer has completed its investigation. However, if there is a portion of your credit card balance that hasn’t been disputed, you must make the minimum payment on that balance.
For example, you ordered $150 grill on your credit card, but never received it and disputed the charge with your credit card. You had a $0 balance before you made the purchase. You are not required to make your minimum payment.
Let’s take the same purchase, but assume you had another $100 purchase on your billing statement. There is no dispute for the $100 purchase, then you must make your minimum payment.
Why You Should Pay Your Credit Card on Time
Paying your credit card on time saves money and protects your credit score. Paying your credit cards on time shows future creditors and lenders that you can be trusted to repay money you borrow. They’re more willing to loan money to you show you can pay on time.
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