The Harsh Consequences of One Late Payment

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It happens to the best of us: We forget a bill and end up paying late. But when it comes to credit cards, this is one mistake that can turn out to be costly. Here's what can happen and how you might avoid the pain.

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Life gets busy. Every so often, a bill can get overlooked or paid late. It can happen regardless of your credit score or income level.

But if you miss a credit card payment, there can be a big price to pay. It does not matter what your credit history is or how long you have made on-time payments. If you miss making one minimum payment by the due date, you will likely get a notice that your issuer will charge a higher interest rate on future purchases. This can be accompanied by a late fee and lost reward points. A missed payment is an expensive mistake.

Here are some possible consequences from missing one minimum payment:

  • Late payment fee. The fee can range from $15 to $35 and will be added to your balance.
  • Interest charges. You will have to pay interest on your balance. This is quite a shock if you always pay your balance in full. The amount of interest will depend on the APR for your card.
  • Higher interest rates. If you have a late payment, you will be subject to a rate increase, but the extent of the increase can be confusing.

If you are late with your minimum payment, your issuer can raise your interest rate on new purchases. Your issuer has to provide 45 days’ notice of the increase and the conditions, and provide the start date for the increase. The issuer can increase the APR on your new purchases as high as the penalty APR; this ranges from 27 to 29.99 percent with most issuers. The new interest rate will apply for at least six billing periods. If you make all of these six payments on time, the CARD Act requires your issuer to review your account, and if appropriate, give you a reduction in your interest rate.

If your payment is more than 60 days past due, your issuer can give a 45-day notice and increase the interest rate on your existing balance. Again, if your make at least the minimum payments on time for the next six months, the issuer has to review your account and, if appropriate, lower your interest rate.

  • Lower credit score. Your issuer can report your missed payment to your credit reporting agencies, and this can pull down your credit score. Payment history accounts for an estimated 35 percent of your credit score. If this missed payment was a one-time mistake in a good credit history, then your credit score should rebound.
  • Forfeited points. If you did not pay the minimum due by the closing of the next billing period, rewards, points, or miles earned for that billing period might be forfeited. Capital One cardholders will lose any rewards applied to a balance during the billing cycle containing a late fee. Some issuers charge a fee to reinstate the rewards. American Express charges $29 for each month of reinstated points or miles, once you have paid the minimum due.

“Make sure the points are worth the fee,” says Bill Hardekopf, CEO of and author of The Credit Card Guidebook. “A $29 fee may be much more than your points are worth, so you may be throwing money away. Points are worth about a penny for most reward programs.”

Avoiding the Pain of Missed Payments

  • Call your issuer and ask them to waive the late fee. Tell them you have been a good customer and just made a mistake. There is a chance they will revoke the fee if you have a good payment history.
  • Set up automatic payments so you will never miss a payment or forget to pay your credit card bill.
  • Sign up to receive payment alerts via email. These can serve as great reminders that your payment is due in a week.
  • Pay on time. Issuers are now required to review your account six months after instituting a rate increase. If you have paid on time for the subsequent six months, your APR could be restored to the original rate.
  • Ask for your rewards to be reinstated. Your issuer may not waive the reinstatement fee, but it doesn’t hurt to ask. If they don’t, you have to decide if the rewards are worth the fee.
  • Create a certain location in your household where all bills are stored so they don’t end up in your purse or your briefcase. Set up a specific day to pay them every week.

Stacy Johnson

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