Late Credit Card Payment: It Isn’t The End Of The World, If You Act Quickly
Well it finally happened to me. After managing my credit for close to 20 years, and juggling 30 credit cards for the last decade, I finally had a late payment. I have a tried and true system, so how did this happen? And how much did that late credit card payment affect my credit score? I will give you the cliff notes version, it didn’t! Only because I acted swiftly was I able to avoid certain doom.
Why A Late Credit Card Payment Is A Huge Deal
As you can see from the image above, your payment history is the most important part of your credit score. A missed payment can turn into a massive 100 point drop in your credit score. You can spend years building up your credit score, only to see it jump off a cliff from one mistake. That is why it is so important to stay on top of your payments.
In the search of credit card rewards we like to make it difficult on ourselves. Managing 20-30 credit cards between two people, to go along with multiple bank accounts, can become cumbersome. And mistakes can and probably will happen, but even if you miss a payment you still have time to make it right. Hopefully we can negate that risk by putting a great payment system in place, which I thought I had.
How Did My Payment System Fail Me?
I have a somewhat cumbersome system that has always worked for me in the past, until now at least. I have an Excel spreadsheet with every active card on it and their statement date. Once a statement cuts I make the payment and add it to my sheet. Usually when I am in the bank login I will spot check my other cards with that bank as a secondary check, even if it is shown as paid. I am also checking for fraudulent charges during these checks.
This all happened a few months ago before travel was halted. I had a 3 week stretch where I was gone every weekend traveling. And weekends are usually when I do my bill paying and book keeping etc. So I was short on time and it just so happens that I put a payment for my wife’s card into the slot for my card on my spreadsheet. I also filled her slot with that payment at a later date during a spot check, so all looked paid to me.
Normally if something like this happened I would catch it on the double check when paying other cards with the same bank. Since I was gone every weekend I didn’t check things as thoroughly and missed it.
What Could I done Differently?
So what changes could I make to my system to streamline things? I probably should have set up for auto minimum payments a long time ago. I resisted setting up straight auto payments because I am always moving money around when chasing bank bonuses. So I make credit card payments from 5 or 6 different banks at a time and they are not always the same. I could and probably should set it up as an automatic minimum payment. This would protect me from late payments and wouldn’t be large amounts. Because the auto payments would be smaller I wouldn’t have to worry about overdrawing an account. Then I could go back in later and pay the remaining balance before the due date to avoid paying any interest.
I have also talked about changing the statement closing dates to all the same day in the past. This would mean I could hit every card payment at the same time which would make things a lot easier. Well, it is safe to say I have dropped off that gold standard the last year or so and things are all over the place again.
How I Avoided A Score Drop After My Late Credit Card Payment
It may be surprising to some to know that a late payment does not automatically drop your credit score. Most lenders will not report a late payment to the credit bureaus until the payment has been in default for 30 days. Your score drop will also depend on if it is a 30 day late payment or a 90 day late payment etc.
What does 30 days late mean? Well when you miss your payment you are technically only late a day at that point. Even though that charge could be 6-8 weeks old the clock doesn’t start until your due date for the charge has passed. Let’s look at an example:
- Make a purchase January 1st
- Statement closes on January 31st
- Due date is February 25th
- Missed payment on the 25th
- New statement cuts on February 28th
- You need to make a payment covering the missed payment entirely before March 26th (30 days later with this being a leap year)
You will want to make the payment as soon as possible but also be sure to make the payment a few days before that 30 day mark. That would ensure the payment posts before the 30 days are up.
A Late Payment Can Hurt In Other Ways Too
Late Fees
If you are late on a credit card payment you will likely get hit with late fees. These usually post to your account the very next day. The fees will not be cheap, averaging around $35 per infraction. Interest will also be charged on your previous bill and the late fee.
If you are not a serial offender most lenders will credit these fees if you ask after getting caught up. American Express waived mine when I asked over chat since it was my first time missing a payment. It is always worth asking.
Losing Rewards
Another issue you may run into is points or rewards earned during that statement period are often forfeited when a payment is late. American Express was willing to reinstate these when I asked as well. But remember they are not required to waive the late fee or reinstate the points. This simple mistake could cost you thousands of points depending on the month.
Future Denials
The last thing I wanted to mention was that some lenders will put you on a new account freeze when you have a late payment. American Express will often auto deny any new applications for 6 months after a late payment. It appears they are going back even further than that these days. One time I put in my new bank account info wrong and my payment was returned. I corrected it and made the payment again before the due date and I was still frozen from new accounts for 6 months.
Final Thoughts On Late Credit Card Payments
Hopefully I have shown you that late credit card payments are not the end of the world, if you act quickly at least. The late payment is not reported to credit bureaus until the payment has been late for 30 days. That means you have time to make it right.
Having said that you want to avoid late payments at all costs. The fees and interest charges can add up, you could lose valuable rewards and you may be denied new credit cards in the future because of it. And all happens even if your credit score doesn’t drop a point!
Some good tips on making sure you avoid late payments are to auto pay your account minimums and then pay off the rest of the balance before the due date. This avoids any late payments and all interest. You can also change your statement dates so they are easier to manage. Or you can track all of your payments on a trusty spreadsheet, just don’t mess up like me 😁.
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Mark I also have a spreadsheet to maintain the roughly 25-30 cards that my wife and I have. I always make my payment on the payment due date. In my system I only update that account in my spreadsheet when I have actually entered the payment on the card company’s website.
This past month we received an email from Barclay’s that we missed a payment on her account on the day after the due date. Since this was before the statement close date I was able to immediately post a payment. Yes they charged a late fee which we will reach out and ask them to waive but it was all before the actual statement close date. So this will never be reported as a late payment to the 3 credit bureaus.
As you know most of the card companies payment screen have multiple steps and a final confirmation. All I can think of is that I put the paid entry in my spreadsheet but had never done the final confirmation, or the page timed out when I got distracted. Either way I think I’m going to do as you suggest and setup an auto payment for the minimum just in case to avoid this going forward.
I have had that happened before – forget to hit submit. I caught it a few days later but yes the multiple confirmations can catch you if you get distracted by something else, which I normally do lol
DEFINITELY make sure you have auto payments set up. Even if you don’t want to pay the entire balance just have it set up to make the minimum balance. I prefer to pay the entire balance as I don’t keep balances at all on my cards. I also use a spreadsheet but at least have the auto payment on each of my cards.
Glad it didn’t affect your score!
Yeah having auto min payments is something I need to do and then go back and pay off everything with the account that works best that month.