A credit card can be a useful tool to cover expenses in a financial crisis or to avoid carrying large amounts of cash with you when you go out and about. However, Your bill needs to be paid monthly or risk a small purchase becoming more expensive than you bargained for.
When life is hectic or you’re struggling financially, you may not be able to pay off your credit card. Instead of panicking, sit down and take a minute to consider ways to prevent the situation from getting worse. There are simple steps to take to rectify the situation and get your payments back on track without hesitation.
What to do if you don’t pay with your credit card
The first thing you want to do if you check your balance and see a “due” notice in your payment history is not to panic, you want to take action right away. First of all, if you can, pay your money back. If your money is running low, at least try to make the minimum payment immediately.
The earlier you get your loan payments to your lender, the lower the risk of late payments. This can include late fees, interest charges and lowering your credit score.
You’ll also want to contact your credit card company. Although you may be charged a late fee for not paying, if you have a good reputation and it’s your first time, you may be able to sweet talk a customer service representative to avoid this. Don’t give up, it doesn’t hurt to try.
What happens if you are late on a credit card payment?
In addition to spending unnecessary extra money through late fees and higher interest rates on your balance, Your credit score is most at risk if you don’t pay your bills on time. Fortunately, if you default but are able to pay your bills within 30 days, it won’t show up on your credit report.
However, before this time, for every additional 30 days you miss payments, your credit score will drop further. This is important because payment history makes up 35 percent of the FICO Score model, meaning that late payments can quickly lead to your downgrade. also, the higher your credit score, the more you will be penalized.
If your financial institution is desperate to get you to pay them, Debt collection work will be turned over to debt collection agencies. This will further damage your credit score. This usually happens after six months but there is no set rule and it depends on your credit card company when they will call a debt collector.
Late fees for non-paying credit cards
The simple fact of not making payments will automatically result in both late fees and interest rates. The first is usually between $20 and $40, but there are limits set by law.
Pursuant to the Credit Card Accountability and Disclosure Act of 2009 (CARD Act) the first late payment fee will not exceed $30 until January 2022. However, if after this late payment you make another late payment within the next six billing cycles, Your credit card company can charge you up to $41 for each late payment.
But the late fee should not exceed the minimum amount due in the account. Late fee amounts are adjusted annually by the Consumer Financial Protection Bureau (CFPB).
Higher APR interest rates for missing credit card payments
Failure to pay on your credit card can also result in higher interest rates. Your financial institution may apply a penalty APR once you miss the payment that applies to future purchases. You may also lose any interest rate programs you had with your lender. Over time, this higher interest rate may also be applied to the rest of your balance.
You will want to talk to your provider’s customer service again see if you can repay the interest rate at a lower rate. Paying as soon as possible will show good intentions but there is no guarantee that it will arrive immediately. If they say no, try again after you’ve made six months of on-time payments.