Just about everyone has made a late payment on a credit card bill. Sometimes it’s just a day late, other times it could be more than a month late. Did you ever wonder about the full effect late payments have on your finances?
For starters, let’s say a payment arrives a few days late. The credit card company charges a late fee, and it could be as much as $35 (for the second violation, $25 for the first as limited in the CARD Act of 2009). Card issuers are now prohibited from imposing penalty fees in excess of the amount of the violation. So, a consumer who exceeds a credit limit by $10 can’t be penalized for more than $10. Or, those late making a $25 minimum payment can’t be charged a penalty of more than $25. However, if a consumer doesn’t pay her minimum payment for two or more consecutive billing cycles, the issuer can impose a late fee of up to 3 percent of the past due balance. The late fee is charged each time you pay late and will stop when you make an on-time minimum payment.
Based on the terms of your credit card, you may experience an increase in your interest rate when you don’t pay as agreed. Because of your higher interest rate, your future minimum monthly payments will increase. This will require you to revisit your budget and make some uncomfortable adjustments. If your payment arrives more than 30 days late, you can expect a negative effect on your credit score.
A lower score will increase the cost of borrowing when you apply for credit cards, auto loans, or a mortgage. So, one late payment can create a ripple effect that touches all parts of your financial life. That’s why it’s important to maintain control of your budget and debt by getting help before things get to the point where you miss a credit card or home loan payment. Get started now online or call Clearpoint Credit Counseling Solutions at 800.750.2227 (CCCS) for a free budget and credit review with a certified consumer credit counselor.