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What are the penalties for missed credit card payments?

The prevalence of consumer debt in America may prompt you to believe that you should avoid having credit cards altogether. Yet financial experts in Nashville do not typically discourage having credit cards (on the contrary, many actually recommend holding three or four for the credit benefits they offer alone). However, proper management is the key to enjoying the benefits that credit cards can provide. Yet there may come a time when funds are tight, and you may think that missing a monthly payment (with the intention of making it up the following month) is fine. This, however, prompts the question of what penalties a credit provider is allowed to assess for missed payments? 

According to Credit Karma, the most common penalty assessed by credit providers for missed payments is a late fee. These can be imposed the day after a payment due date. Additionally, if you are over your credit limit, you could be charged a fee for that, as well. If you are more than 30 days delinquent with your payment, your credit provider can report a missed payment to any of the three major credit bureaus. Ultimately, payment histories account for roughly 35 percent of your credit score, so staying current is an easy way to maintain a strong rating. 

Perhaps the biggest penalty for a late or missed payment, however, is the one assessed against your interest rates. Low rates are one of the main benefits offered by credit providers, but they are contingent on payment performance. A single late payment can forfeit your right to rate offers (such as 0 percent interest promotions), and even invoke a penalty annual percentage rate as high as 30 percent. If this happens to you, making your payments on time over a six-month period may allow you to go back to a lower rate. 

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Rothschild & Ausbrooks, PLLC
1222 16th Avenue South, Suite 12
Nashville, TN 37212

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