About 1 in 5 Americans (21%) have made a credit card payment 30 or more days late, according to a new NerdWallet report. The No. 1 reason for missing payments? They simply forgot to do it.
When you don’t have the money, missing a credit card payment may be unavoidable. But forgetting to pay, which was cited by 35% of those who have missed a payment, is an easily avoidable, and potentially costly, blunder. Using a card issuer’s website makes it easier to not forget your payment due date or can make it so you don’t even have to remember.
Never forget a payment again
There are several ways to make it virtually impossible to forget a payment. Here are three methods:
1. If you don’t want to think about it: Automatic payments
The simplest way to avoid missing your due date is to set up automatic payments, which you can do through your credit card issuer’s website. Ideally, you’ll pay off the entire card balance each month. But if that isn’t possible right now, at least set up an automatic payment for the minimum amount due. A small minimum payment may not seem worth it, but it can save you money on late fees and interest while protecting your credit score.
2. If you want to review payments first: Text or email alerts
If the thought of money coming out of your bank account without you getting the chance to review it makes you uneasy, or if you aren’t sure how much you can afford to pay each month, you can set up text and/or email alerts through your credit card issuer’s website. You’ll get an alert a few days before your payment is due, and you can check your statement to make sure all charges are accurate — a good practice no matter how you handle your bill. Then, make at least the minimum payment before your due date.
3. If you don’t want to rely on the issuer: Get your calendar organized
Another method — though this is more likely to be derailed by human error — is adding your payment due dates to a digital or paper calendar. Digital is better since you can schedule reminders to repeat every month on the same day with minimal effort. The calendar option is best combined with one of the other methods discussed, but it’s a solid solution if you really don’t want to deal with your card issuer’s website.
High costs of forgetfulness
Why is it so important that you pay what amounts to 1% to 3% of your balance — the typical minimum monthly payment? Because it avoids the short- and long-term costs associated with paying late:
- Late fees. Even if you’re just a day late, your card issuer could charge you a late payment fee. The maximum cost for a first-time late payment is $27, and subsequent late payments could cost up to $38 each time. If you forget to make a payment and get charged a fee, call your issuer and try to have the fee waived. Issuers may be willing to work with you on this, especially if it’s the first time.
- Penalty APRs. A penalty APR is a higher interest rate applied to your credit card balance if your payment is 60 days or more late. This new rate could be almost 30% or about double the average credit card interest rate.
- Higher rates on future loans or credit cards. Perhaps the biggest financial impact of late payments is the damage they can do to your credit scores. Several factors influence your credit scores, but the biggest is payment history, which makes up 35% of a FICO score. Credit card payments over 30 days late are typically reported to the credit bureaus and will affect your scores.
The lower your credit scores, the fewer options you’ll have for credit cards and loans — and even housing. Bad credit means higher interest rates and possibly more expensive car insurance and utility deposits as well.
Since a late payment can hurt your finances in so many ways, it will literally pay off to get organized, set up automatic payments or sign up for alerts so you never forget again.