I consider myself a relatively responsible person who pays her bills on time, so when I logged in to my credit card account last winter to see that I had missed a payment and been charged a late fee, I was not happy. Missing the payment happened entirely by accident; I simply forgot to pay it.
While forgetting to make a payment might seem like a pretty boneheaded move, it was actually the most common reason people gave for making a delinquent credit card payment, defined as being late by 30 days or more, according to NerdWallet’s recently released 2018 Consumer Credit Card Report. (Other common reasons given were that they needed the money to pay for essentials or for an unexpected emergency.)
The ins and outs of automatic payments
The good news for consumers is that there is a relatively easy fix for that oversight: setting up automatic payments. Automatic payments come directly out of your bank account every month on or before the card’s due date, which means you can think about other things than remembering to transfer money.
One risk with automatic payments is that if your bank account doesn’t contain enough money to cover the transfer amount, you could be charged an overdraft fee or the payment could be declined. So you’ll want to monitor your bank account closely.
Some consumers also note that they prefer manual payments because it reminds them to review the charges on their card that month, a good habit to prevent fraud and errors.
Card issuers do vary slightly on the details of automatic payments, so you’ll want to log in to your account and check out your options. In general, the major card issuers allow you to set up automatic payments either through your account online or the mobile app.
Some allow you to select the date the funds will transfer; others preselect a default of the payment’s due date. Some card issuers allow you to automatically transfer any amount over the minimum payment, while others may have different parameters.
Late payments take a toll
It’s worth taking steps to avoid late payments since they can have such a detrimental effect on your finances. Not only do late payments by even just one day come with a late fee (up to a maximum of $27 the first time and $38 for subsequent instances), but they can increase the interest rate on your card by triggering the penalty APR.
Even worse, late payments can impact your credit score. If a payment is more than 30 days overdue, which is known as delinquent, it typically gets reported to the credit bureaus, where it becomes a black mark on your credit report, potentially lowering your credit score. That means it can limit your future access to credit, including the interest rate you are able to get on products like auto loans and mortgages.
And if your payment is so late (typically more than 180 days past the due date) that the issuer decides to write off your account, known as a charge-off, then your debt can be passed over to a collections agency and your credit report will reflect the charge-off for seven years — which means, once again, a lower credit score.
A happy ending
After my own late-payment blunder, I immediately set up automatic payments on my card. I also emailed customer service and asked that the $27 late fee be waived. I explained that it had happened by accident and that I hadn’t previously paid late. Within a few days, I received an email back saying that the late fee charge had been reversed. Thanks to my newly automated payments, I haven’t missed another due date since.
This article was written by NerdWallet and was originally published by Forbes.