Making on-time credit card payments is essential, especially when you’re trying to raise your credit score. You can prevent high annual percentage rates (APRs) and build a credit score by paying off your credit card debt on time.

On-time credit card payments are essential because they have a direct impact on your finances and credit score, which is necessary to obtain larger loans such as mortgages or auto loans. However, what happens if you forget to make a payment or are unable to make the minimum payment? In this blog, we will look at the possible repercussions of not making your credit card payment and what you can do to manage the situation.

Incurring Late Fees

Your credit card company will impose a late fee on you if you fail to make your monthly payments on time. Usually, this additional fee ranges from $15 to $35. It occurs when you either pay nothing at all or less than the minimum amount they demand. These late fees may increase if you consistently fail to make payments on time. As a result, you have to pay more money than the initial bill. In order to prevent these additional fees, it’s essential to make an effort to pay the minimum amount on time.

Interest Accumulation on Late Payments

Not only will you incur a late fee for missing payments, but interest will also accumulate on your outstanding balance. Interest rates on credit cards are typically high, ranging from 20% to 25%, and occasionally even higher. This implies that if you miss payments, the total amount you owe may rise fast. If this mounting debt is not carefully managed, it could become a major issue. It’s best to pay your credit card bill on time, even if it’s just the minimum amount, to prevent your debt from growing too large.

Rise in Interest Rate

Your interest rate may increase significantly if you miss a credit card payment by more than 60 days. This higher rate is known as a “penalty” rate, and it is usually the maximum rate allowed by your credit card. As a result, it will take you longer to pay off your debt and will require you to make larger payments. However, this penalty may be waived if you manage to get back on track and pay your bills on schedule for six consecutive months. Depending on your credit card’s terms, you may be able to return to your previous interest rate.

Credit Report Implications

Your credit report is updated if you are more than thirty days overdue on a payment. If you continue to be late, this record will be updated every month for a maximum of 180 days. 180 days later, the status of your account is “charged-off.” This is a serious black mark that may significantly reduce your credit score. It will remain on your report for seven years. It’s crucial to make every effort to make your credit card payments on time because of this. 

Decline in Credit Score

As timely payments account for 35% of your credit score, they are essential to a healthy credit score. Your score could decrease every time you miss a payment. Missing a payment can be especially damaging if you have a high credit score. Lenders may conclude you are unreliable if you make late payments. In the future, this may make it more difficult to obtain loans or favorable interest rates. Not only is it crucial to pay your bills on time, but it’s also crucial to keep your credit score high. A high score makes it possible to get better terms and financial opportunities later on.

Financial Stress 

Financial stress can be increased by debt accumulation and rising interest rates. This burden has an impact not only on your bank account but also on your overall well-being. Your mental and financial well-being may be affected by the strain of mounting debt, which can induce a persistent state of anxiety. For a balanced life, it’s important to deal with these stresses as soon as possible.

What Should I Do?

Keeping your credit score high mostly depends on timely payment. While keeping up with debts is important, there are times when life presents unexpected challenges. It’s essential in these circumstances to act proactively before things get worse and lenders start to put pressure on you. 

At EmpireOne Credit, we are aware of the challenges and complexities involved in managing debt. Our goal is to support you while you get through these trying times. Our team of debt experts helps reduce stress and debt by providing advice and solutions that are specifically designed to meet your financial needs. Your debt can be reduced by up to 80%, and interest will stop immediately.

You don’t have to wait until the situation gets worse. Call us at (416) 900-2324 to schedule a free consultation with one of our debt experts. Being debt-free feels good!