What Happens When You Cannot Make Your Minimum Credit Card Payment?

Stack of credit cards

It has been said time and time again that even if you cannot pay off the full balance on your credit card every month, you should at least try and make the minimum payment. If you cannot make this smaller payment, it counts as a missed payment and will hurt your credit score. However, many people cannot even make that minimum payment, particularly amid the COVID-19 crisis if they have lost their job, their business, or even have had their hours reduced.

In this situation, one of the worst aspects can be not knowing what will happen next. Below are a few things you can expect if you cannot make your minimum payment, and what you should do if that is the case.

You May Incur Late Fees

In the event that you miss your minimum payment for a full month, the creditor will likely charge you late fees. If you miss making the monthly payment for more than 30 days, the creditor will likely report the missed payment to the credit bureaus and they can also charge you a late fee up to $29. Even if you make that minimum payment but miss another minimum payment within six months, your creditor can charge you a late fee as high as $40. These late fees only put you further behind financially, but it is important to note that your creditor cannot charge a late fee that is higher than the total amount you owe.

Missing a Payment will Affect Your Credit Score

Some credit card companies, such as American Express, will not report a delinquent payment until you are over 60 days late, essentially when you have missed two late payments. In any case, if your credit card company does notify a credit reporting bureau, such as TransUnion or Equifax, it will lower your credit score. It will also remain on your credit report for as long as seven years, which means that it will take time to get your score back to the level it was at, and it will make it harder to obtain credit in the future.

You May Incur a Penalty Interest Rate

Missing even one payment on your credit card can increase your interest rate to the highest penalty rate. Credit card companies are allowed to apply the penalty annual percentage rate (APR) to your overall balance if you miss two consecutive payments and your account becomes delinquent. Although credit card companies are legally allowed to do this, they must also tell you the percentage of the penalty APR they will charge. They must also tell you how long they will impose that penalty rate. For example, they may apply the APR until you have made 12 consecutive on-time minimum payments. The APR your lender may charge you can be as high as 27.24 percent to 29.99 percent.

Making Payments Online vs. Through the Mail

Making a payment either online or through the mail can have an effect on whether late charges and higher interest rates apply. For example, if the payment is mailed in and the due date falls on a day when there is no postal service, such as a weekend, the payment is not considered late as long as the credit company receives it by the end of the day the next business day. Payments that are made online must be made by the end of the day, regardless of the date, or they are considered late.

What to Do if You Cannot Make Your Minimum Payment

If you cannot make your minimum payment, the worst thing you can do is ignore the situation. When you are only a few days late, you should make the payment as soon as possible, and definitely before the next billing period starts. Credit card companies typically only report late payments once you miss the payment for more than 30 days. Making the payment prior to that time can help you avoid the hit to your credit score, as well as the other negative impacts of missing your minimum payment.

When making even the minimum payment is impossible, you may want to first check the documentation and contract you entered into when you first got the card. Some cards, such as the Discover card and Citi Double Cash cards, automatically waive the first late fee as a perk to draw in more customers.

If the contract does not specify that the late fee is waived, you must call your credit card company. Explain the situation and why you cannot make the payment. Doing this before your minimum payment is due can be particularly beneficial. Also tell them when you will be able to make the payment, keeping in mind that the sooner you can do this, the more leniency your credit card company will give you. Make sure you also tell the credit card company that this is a one-time occurrence, particularly if you have not been late with a minimum payment before.

Many credit card companies are happy to work with their customers when they have missed, or are about to miss, a minimum payment. This is particularly true if you have had the credit card for several years and have not missed a payment, or several payments, in the past. You may be surprised to find that your credit card company will extend your due date, waive the late fee, and not report the missed payment to the credit card bureaus.

Missed More Than One Payment? Our Florida Debt Defense Lawyers Can Help

A credit card company is not going to file a lawsuit against you if you have only missed one or two payments. Unfortunately, if you have missed more than that, your creditor may take legal action. When that is the case, our Fort Lauderdale debt defense attorneys at Loan Lawyers can help. We know the defenses available in debt lawsuits, and how to use them effectively for your case. If a credit card company has filed a lawsuit against you, call us today at (954) 523-HELP (4357) or contact us online to schedule a free consultation.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations.  Contact us for a free consultation and find out more about our money-back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.