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What really happens when you make a late credit card payment

A late credit card payment can have a big impact on your credit score and interest rate.

Jacob Palmer

Contributing Writer at Tally

January 14, 2019

Credit card bills creep up on you sometimes. Maybe you’re traveling and lose track of what day it is, or maybe you’re busy with work and forget to pay that one card in the back of your wallet.

Whatever the reason, you don’t need to panic. It happens to the best of us.

More than 1 in 4 Americans reported making a late credit card payment at least once in their life, according to NerdWallet’s 2019 Consumer Credit Card Report, and 12% have made multiple late payments. The late fees on this amount to more than $3 billion — and that doesn’t include interest!

A helpful way to never make another late credit card payment is to fully understand the consequences. First, let’s look at the potential impacts of a late payment — then, we’ll explore ways to prevent it in the future.

4 potential impacts of a late credit card payment

1. Impact on credit report

A late credit card payment that is at least 30 days past due is typically reported to the three major credit bureaus (Equifax, Experian and TransUnion). And it can stay on your credit report for up to seven years.

A late payment on your credit report can hurt how you’re seen as a borrower. It will show up on a variety of credit checks, which could impact your ability to secure a loan, a new credit card or even housing.

2. Impact on credit score

Your credit score can drop as a result of a late credit card payment that is 30 days past due. If you miss a payment by fewer than 30 days, you can usually recover with minimal harm to your credit score.

Payment history is a major factor (roughly 35%) in determining your credit score.

If you have a great credit score and make just one late payment, the impact may be noticeable. And if you have an average credit score, a late payment can make it that much harder to build up your score again.

3. Impact on card balance

The impacts on your credit report and credit score can affect you in the long term, but you’ll probably be charged a late fee right away. That can increase your balance and make your debt repayment timeline even longer.

Late fees can be enforced even if you’re only one day late with your payment.

Credit card issuers generally charge around $25 the first time you make a late payment, depending on your agreement. If you make more than one late payment, expect the late fee to increase.

In 2019, the maximum late fee allowed increased to $28 for first-timers and $39 for repeat offenders.

4. Impact on interest rate

If you make a late credit card payment, your card issuer can raise the annual percentage rate (APR) on the interest fees calculated on any remaining balance you carry.

This “penalty rate” can be as high as just under 30 percent — significantly higher than the rate offered by a rewards card, which will generally have an APR that is considered higher than average.

If you make a late payment on a credit card with a promotional rate, you can lose the benefits of that promotion, and your APR can skyrocket all the way up to the penalty rate.

That’s why it’s important to keep track of your payment schedule if you’re looking to take advantage of a card with a promotional rate, especially those that offer free balance transfers and a temporarily low APR.

What should I watch out for?

Four major factors determine how hard your credit score is hit for a late credit card payment:

  • How many times you’ve been late.

  • How long ago it happened.

  • How high your balance was.

  • How late the payment was.

Now that you know the potential impacts of a late credit card payment, let’s explore some ways to remedy the situation. Here are 5 steps you can take to help yourself.

5 ways to to avoid a late credit card payment

1. Pay overdue bills ASAP

Like most mistakes in personal finance, you can recover if you’re deliberate and serious about it. And it’s important to start that process as soon as you can after making a mistake. If you have outstanding balances, they should be your top priority. And if you keep the balances you carry over from month to month as low as possible, it will keep your interest charges to a minimum.

“There’s a grace period before a late payment really bites you, usually 30 days,” said Bethy Hardeman, Tally’s Personal Finance Expert. “Go ahead and pay your bill first. Then, figure out what happened and find a way to plan for the future.”

2. Create reminders

Your credit card billing due date is usually the same time every month. Add a reminder somewhere you are constantly looking — your phone, email, calendar, etc. — and forecast when you’ll be paid. By setting up a recurring reminder the same time every month, you’ll be covered with your credit card bill. There are even apps that you can download designed to help you with bill payment scheduling and reminders.

3. Set up automatic payments

If you truly want to take the stress out of a missed payment and are confident you’ll have enough money to avoid an overdraft, consider setting up automatic payments. In addition to ensuring you have sufficient funds, ensure you’re paying more than the minimum payment. Remember: Just because you have automatic payments doesn’t mean you can ignore your accounts. Continue to monitor them to ensure you aren’t wasting any money. Many banks will gladly set this up for you if you’re having trouble setting it up yourself. You’ll sleep better knowing you’re not relying on yourself alone to remember to pay your credit card on time.

4. Overcome a penalty rate

Your credit card company can’t keep you under a penalty rate forever. By repeatedly making on-time payments on your account, your APR will eventually be reset to what it was before you made a late payment. Creditors can enforce the penalty rate for up to 6 months. If you take the right steps throughout that time, you can only raise the likelihood of getting out from under that punitive APR. Discipline yourself to make better financial decisions so you can make your payments in full and on time.  

5. Ask for forgiveness

If you’ve never made a late payment before and have been a customer of your credit card company for a considerable amount of time, call to see if they will let one minor mistake slide. You won’t lose anything by asking, and you could potentially avoid a penalty rate and fees and a report to the credit bureaus that could affect your credit score.

“If you’ve never made a late payment before, it’s OK to call and ask for forgiveness,” Hardeman said. “Be kind and courteous. They have the power to forgive your mistakes, so try to appeal to their empathetic side.”

A lot of people seem to think that credit card charges for late payment are not subject to change. That is not the case. In fact, credit card companies can be very flexible. They are more than willing to work with those who want to reduce or eliminate their debt. The key is to always ask for the options available for you.