What Happens if You Miss a Credit Card Payment?

Missing a credit card payment can cause significant financial concern. Understanding the potential repercussions of such an event is important for maintaining sound personal financial health and navigating any challenges that may arise. This insight into the consequences can help individuals make informed decisions about their credit.

Immediate Financial Consequences

Falling behind on a credit card payment often results in immediate financial penalties. The credit card issuer typically applies a late fee to the account soon after the payment due date passes. For large credit card issuers, a new rule from the Consumer Financial Protection Bureau (CFPB) effective May 2024 caps typical late fees at $8, a reduction from previous averages. Smaller issuers may still charge higher amounts.

Beyond the initial late fee, missing a payment can also trigger a penalty Annual Percentage Rate (APR) on the account. This higher interest rate can apply to new purchases or the entire outstanding balance. These immediate charges and increased interest can quickly inflate the total debt, making it harder to catch up on payments.

Credit Report and Score Impact

The impact on an individual’s credit report and score represents a distinct and often more lasting consequence of a missed payment. Credit card companies generally report payments as late to the three major credit bureaus—Experian, Equifax, and TransUnion—once they are at least 30 days past the due date. If a payment is made a few days or even a couple of weeks late, it typically will not be reported to the credit bureaus as long as it is received before the 30-day mark.

Payment history holds significant weight in credit scoring models, such as the FICO Score, accounting for approximately 35% of the overall score. A single 30-day late payment can cause a notable drop in a credit score, particularly for individuals who previously maintained excellent credit. This reduction can affect various aspects of financial life, including the ability to obtain new credit, secure favorable interest rates on loans, and even influence insurance premiums or housing applications.

A reported late payment remains on a credit report for up to seven years from the original delinquency date. While the impact on the credit score may lessen over time with consistent on-time payments, the negative mark persists.

Long-Term Account Status

Should a credit card payment remain unpaid for an extended period, the consequences escalate, leading to a progression of delinquency statuses. After 30 days, the account is considered delinquent, and if payments continue to be missed, it progresses to 60, 90, and then 120 days late. Each subsequent reporting of a missed payment further compounds the negative effect on the credit score.

A severe outcome occurs when an account reaches “charge-off” status, typically after 120 to 180 days of continuous non-payment. A charge-off signifies that the creditor has deemed the debt uncollectible and written it off as a loss. However, a charge-off does not absolve the individual of the debt; the money is still owed, and the creditor maintains the right to collect it.

Following a charge-off, the original creditor may attempt to collect the debt or sell it to a third-party collections agency. Collection agencies will contact the individual to recover the outstanding balance, often through phone calls and written demand letters. If collection efforts are unsuccessful, the creditor or collection agency may pursue legal action, which could result in a court judgment allowing for wage garnishment or liens on property to satisfy the debt.

Actions to Take After a Missed Payment

If a credit card payment has been missed, taking prompt action can help mitigate the negative consequences. The most effective step is to contact the credit card issuer immediately upon realizing the payment was overlooked. Many issuers are willing to work with cardholders, especially if it is an isolated incident or if the cardholder has a history of timely payments. This communication might lead to negotiating a payment plan, requesting a waiver of the late fee, or exploring options like a temporary hardship program.

Hardship programs can offer temporary relief by potentially reducing interest rates, waiving fees, or allowing for smaller payments for a set period. Making the missed payment as quickly as possible is also beneficial, as it can prevent the delinquency from being reported to credit bureaus if settled before the 30-day mark. To prevent future missed payments, setting up payment reminders through text or email, or enrolling in automatic payments, can be highly effective. Reviewing and adjusting a personal budget can also help ensure sufficient funds are available for all financial obligations.