Unfortunately, these figures aren’t surprising: keeping up with credit card payments has never been more challenging, especially as consumer prices continue to skyrocket.

But for how common it might be, being late for your credit card payments can have devastating consequences on your finances and significantly worsen your debt. Learn how to avoid the worst side effects of missed repayments below.

A Single Late Payment Can Seriously Damage Your Credit Score

One of the key facts about the credit card you need to know is that the way you use your card can impact your credit history.

Indeed, 35% of your credit score is made up by your payment history, which includes the way you handle your credit card balances and repayments.

Some crucial factors to remember to safeguard your finances include:

  • How much your credit score will drop will depend on your payment history
  • Generally, the higher your credit score is, the more it will drop following a late payment
  • Payments are reported to the credit bureau after 30 days. So, by paying your balance and the later payment fee before this cut-off point, you can save your FICo score from damage.
  • If your payment is late by accident, get in touch with your credit card provider to waive the fee - but make sure it was an isolated mistake!

Late Payments Can Lead to Unexpected Fees

Late fees are the most common and best-known consequence of missing a credit card payment. Luckily, credit card late fees can be easily avoided by understanding your credit card agreement or choosing a card that does not charge credit card late payment fees.

Most credit card contracts explicitly state the fees that users will be charged in the event of late payments, usually ranging between $15 and $35. Alternatively, if your outstanding balance is minimal, you might be charged a percentage of the amount you owe.

You Might Lose Access to Your Interest-Free Period

Most credit card providers offer new users an interest-free credit period, usually ranging between 20 and 50 days. During this time, your credit card issuer will finance your purchase and not charge interest.

Being regularly late with your payments or defaulting on your card multiple times can cause you to lose access to this important benefit.

Your Credit Card Provider Might Reduce Your Credit Limit

Your credit card limit represents the maximum amount you can borrow against your credit card, and using this limit correctly can help you improve your creditworthiness and reliability in the eyes of the lender.

However, when going into default several times or routinely having a utilization rate above 30% can cause your credit card issuer to reduce your credit limit and, in turn, your spending capacity.

Late Payments Can Forfeit Your Credit Card Rewards

If you have handpicked your credit cards for the rewards that each of them provides you are certainly not alone. But some financial habits, such as being late with your credit card repayments, can cause you to lose some or all the perks, miles, discounts, and bonuses you have been accumulating!

Depending on your provider and credit card agreement, you might be able to regain access to your rewards once your balance has been fulfilled.

Credit Cards Providers Can Switch To Penalty APR

When shopping around for your credit card, the chances are that you have compared fees, interest rates, rewards, and APR offers - and rightfully so! But when a payment is missed or returned, you might see your APR to 27-30%!

Indeed, while credit card issues are not allowed to change your APR rate arbitrarily without giving you at least 45 days of notice, they can apply penalty APR charges. Penalty APR refers to an increase in interest rates as a penalty for misusing your credit cards which are only lowered once your balance is paid.

Late Payments Will Stain Your Credit Report

As we have seen above, late payments are reported to credit bureaus after 30 days. This means that if you are only late with your payments by a few days, you won’t see any damages on your credit report.

However, after the 30-day mark, an entry is made in your credit file, which is updated in 30-day increments until you are 180 days late with your payments. At this point, your card is charged off by your provider and the entry on your credit report will remain there for seven years.

Being 180 Days Late on Your Payments Can Lead to Credit Card Default

Missing six days in a row - or being 180 days late on credit card payments - can lead to a credit card default or charge-off. When this happens, your credit card issuer will write off your account as a loss and it will communicate the default to the credit bureau.

Once an entry is made to your credit report, your credit history can remain stained for over seven years.

Only Making Minimum Payments Each Month Can be Just As Damaging For Your Finances

Above we have seen the consequences of missing one or more credit card payments. However, making only the minimum payment each month isn’t much better!

Most credit card providers will indeed allow you to avoid fees by paying only 1.3% of your balance each month - but doing so can cause your debt to swell over time! Indeed, minimum payments are often not even enough to cover the interest on your outstanding balance, thus exponentially increasing the amount owed.

Ideally, you should pay your credit card balance in full each month. But, if you are struggling to keep up with repayments, don’t think twice about partnering with a financial advisor or credit counsellor.

When you know what they are you can avoid the 9 problem that late credit card payments can cause you.