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What Happens if I Miss Credit Card Payments?

Nov. 4, 2013
Credit Card Basics, Credit Cards, Credit Score
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We live in a hectic world — rush, rush, rush. It’s easy to understand why something gets away from us every so often.

We all make mistakes, and we can often fix problems without too much trouble. But forget to pay your credit card bill a few times and there are pretty serious consequences. Take a look at three outcomes:

1. Fees, fees and more fees

Making one late payment on your credit card can lead to a slap on the wrist. According to the CARD Act of 2009, the most a bank can charge for a customer’s first late payment is $25. If you continue to miss payments, you’re in for a lot more fees.

The CARD Act says if a payment is more than 30 days late, or if the customer has made more than one late payment in the past six months, a higher fee (usually $35) can be charged. What’s more, that isn’t necessarily a one-time charge – if you continue to not make payments, you’ll be charged the higher fee every 30 days. After several months of failing to pay your bill, that could add up to hundreds of dollars.

2. Much higher interest rates

Late fees quickly add up, but much higher interest rates are even more pricey. Again, the interest rate hike you’ll experience from making one late payment is much less painful than if you’ve missed several payments.

Under the CARD Act, if you miss a payment, your card issuer may raise your interest rate on future charges. The company must give you 45 days’ notice of the increased charges. That gives you opportunity to pay on time and avoid higher interest charges in the future.

If you make more than one late payment within six months, credit card companies can apply a penalty interest rate to your current balance. Penalty interest rates are usually very high – close to 30% – which means that your monthly minimums will probably skyrocket after two missed payments.

» MORE: How to read your credit card statement

3. Credit score damage

As if a pile of fees and penalty interest rates weren’t enough, there’s another cost for repeatedly paying late: a banged up credit score.

That’s because 35% of your credit score is decided by your payment record for credit card accounts and other bills. And if your credit score is damaged, the result is expensive: Banks use your credit score to decide your interest rate on loans you take out in the future – a lower score means a higher rate.

The takeaway: Missing credit card payments can cost you in several ways. Pay on time and avoid the pain.

» MORE: Why nearly every purchase should be on a credit card