Almost everyone wants to have a credit card today, but only a few know how to manage them well. Many credit cardholders end up having a bad credit score and some of them are even left with poor financial health due to their irresponsible behavior towards credit card usage. Having good and responsible behavior is something that is much required if you want to get the maximum benefits out of your credit card. Missing your payments or delaying them can have really negative impact on your financial health and your credit score as well. If you are a credit card user, you must be aware of the things that can happen when you delay your credit card payment. With this article, we are here to help you understand all the consequences of late credit card payments and how you can avoid them. Keep reading to know more.
Consequences of Late Credit Card Payment
Late Payment Fee
If you don’t pay your credit card bill on the payment due date, a late payment fee is charged on your credit card account, which is added to your next statement. However, you can avoid this fee even if you pay just the minimum amount due on the due date.
You Lose The Interest-free Period
When you pay your bill in full on time, no interest is accrued on your purchases in a billing cycle (except for a few transactions like a cash advance and balance transfer). But, when you fail to make the payment on time, you may lose the interest-free period and the grace period.
Negative Impact on Your Credit Score
Your payment behavior is the most important factor when it comes to your credit score as it makes 35% of your credit score. So, missing or late payments can have a really bad impact on your credit score and it can decrease drastically. However, late payments are only reported to the credit bureaus if you delay them by more than 30 days, but once added to your credit report, they may stay there for the next seven years.
You May Lose Your Rewards
If you don’t pay your credit card bill on time, you may lose some or all of your earned reward points. If not so, you will surely not be able to redeem them until you make your credit card payment.
Decrease in the Credit Limit
When you miss or delay your payments several times, you might seem to be a risky borrower to your card issuer and hence they may decide to decrease your credit limit to avoid any loss. Though you are generally informed before your credit limit is decreased, this can also be a sudden unwanted surprise for you sometimes.
How To Avoid Late Payment?
Automate Your Credit Card Payment
Sometimes credit cardholders miss their credit card payment unknowingly as they don’t remember their payment due date. Automating your credit card payment is one of the best ways to avoid late payments as you don’t need to remember any due date when you opt for this option. If not the full outstanding balance, you must try to set auto-pay at least for the minimum amount due so that you can avoid the late payment charges.
Set The Reminders
If you find auto payments as a suitable option, you can choose to set the reminders for your payment due date so that you don’t miss them. If you use multiple credit cards, make sure to check all your due dates and set different reminders for each of them.
Set Custom Dates for Your Credit Card Payment
Remembering multiple due dates can be really challenging for individuals who use multiple credit cards. If you also use multiple cards, the best way to never miss your credit card payment is to set a custom due date for making payments of all your credit cards so that you can just remember one due date and pay all the bills on the same day. It is advisable to keep this date just a few days after you get paid so that you don’t find it difficult to pay your bills.
Missing or delaying your credit card payment has not only one, but several consequences, so it is highly advisable to not miss them. You must try to pay at least the minimum amount due on the payment due date as it can save you from the late payment charges. But, in order to achieve a good credit score, you should consider paying your full outstanding balance every month. If you unknowingly miss your payments, you must automate your payments or set reminders so that your credit score doesn’t get affected.
If you have any further doubts about the consequences of late credit card payment, you can ask in the comment section below. Also, tell us what do you do to avoid late payments?