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By Kelly B. — Published May 30, 2018
Credit cards have made it easier for us to get the things we want without actually having the money to pay for it at that time. The downside, however, is that we eventually have to pay our credit card bills and if we're not careful things could get out of hand. There are several reasons why we could find ourselves in a position where we can't pay our credit card bill. Some of these reasons include spending more than our income, an unexpected expense or loss, or it could just have happened by accident.
Unfortunately, there can be some grave consequences to skipping your monthly payments and these tend to build up if not corrected as soon as possible. Here is what happens when you skip your monthly credit card payments:
Late fee: If you have not paid at least the minimum amount due by the last date you immediately get charged a late fee. The late me might not be obvious but gets added to your next bill. Late fees can range from $15 to $35 and will depend on the type of credit card scheme you have. The late fee can also depend on how often you miss your payments or if you are a first-time defaulter.
Increased interest rate: If you haven't paid your bill in 60 days then your creditor could increase your interest rates. Again the downside of this is not immediately obvious, but as the increased interest rate adds up, you could stand to lose a lot of money. Many card companies apply the interest rate on a daily basis, so you get charged for each day that your payment is late. The penalty rate can also be applied to other cards by the same issuer. If you are already finding it difficult to pay your bill, this will add to your financial burden.
Credit report: If you don't pay your credit card bill before the 30-day mark of your bill's due date, an entry is made in your credit report. This entry gets updated every 30 days for a total of six months. After the six months / 180 day period you card is charged off, and you lose that card.
Credit score: Missing credit card payments could cause your credit score to drop. With a lower credit score, it will be harder for you to be approved for a credit card in the future or even a loan of any kind.
What you should do
Within the 30 day mark you still only have your bill amount and the late fee to pay. The credit bureau is not informed, and no entry is added to your credit report until after the 30 day period has passed. You should try and make the most of this window of opportunity and pay your bill and the late fee at the earliest. Paying within 30 days will save you a lot down the line.
Even better than missing a payment and paying up within 30 days is to try and make the minimum payment on your bill. Paying at least the minimum payment one time helps you avoid having to pay the late fee. The remaining amount will however still get added to your next bill.
If the bill was not paid by accident; you forgot the due date or paid a wrong bill, you should pay your bill as soon as possible and then inform the credit card company. If you are lucky and haven't defaulted before, you might get a refund on the late fee and even have the interest waived.
The best thing to do is not to skip your monthly credit card payments but if you do, try your best to put things right at the earliest.