When you use a credit card you are, in effect, borrowing money from the credit card provider, which you need to pay back. You will be issued with a monthly bill and have the option of paying the balance in full, thereby avoiding having to pay any interest, or paying part of the outstanding balance. You will be told what the minimum repayment is and the deadline for making that payment.
However, while in an ideal world everyone would make their credit card payments on time, it is worth knowing the potential consequences if you are late making a payment or consistently miss payments.
What happens if I miss a payment on my credit card?
If you miss the deadline for making the minimum repayment, the penalty you are likely to receive becomes more severe as time goes on. Although there isn't a set template for what action the credit card company will take, the table below gives an indication of what to expect:
|Payment is late by||Potential action taken by credit card company|
|1 day||Charge a late fee
End any promotional offer
Report the late payment to credit bureaus Equifax, Experian and TransUnion
|60 days||Charge a higher penalty APR to the balance owed|
Periodically report the continued late payments to credit bureaus
Close account and pass on debt to debt collection agency
There is a risk at any point that the credit card company could take you to court to try to recoup the unpaid debt. This could result in a County Court Judgement (CCJ) and possibly a court order stating that the company can take the money directly from your pay cheque or bank account. In some cases, bailiffs will be instructed to seize goods to cover the value of the outstanding amount.
What happens to my credit rating if I miss a credit card payment?
While a one-off late payment that's delayed by a day or two probably won't be reported to credit agencies, persistent late payments or those that exceed a month are likely to be included on your credit file with the main credit bureaus. Late payments stay on your file for seven years, although they have the greatest impact on your credit score when they first appear on your report, with your credit score generally strengthening again over time if you demonstrate responsible financial management.
Your credit score is important as it dictates whether you'll be accepted for future borrowing, including mortgages, car finance and personal loans. You can find out more about how to improve your credit score in our articles "How to improve your credit score quickly" and "LOQBOX review - should you use it to improve your credit score?"
Why has the promotional offer on my credit card stopped?
While credit card companies are keen to attract new customers by offering extended interest-free periods on purchases, balance transfers and money transfers, a condition of these offers is that the borrower keeps up with at least the minimum monthly repayment. Therefore, if you are late or miss even one payment, the offer can be revoked. This can have serious implications if you have a sizeable balance on the card as you will be automatically moved to the standard APR, which could result in hundreds of pounds of unexpected interest payments.
To avoid getting into this situation, consider setting up a direct debit so that the payment happens automatically each month. If you know you are unlikely to be able to make the payment, contact the credit card company as soon as possible to try to work out a solution that will enable you to continue to benefit from the introductory interest-free rates.
What is persistent debt?
The definition of "persistent debt" is when you have paid more in interest and charges than on repaying your original credit card debt over an 18-month period. This may be caused by making a number of late payments or missing payments, but can also be down to only making the minimum repayment each month, which can have the effect of spreading the debt over years, leading to you paying significantly more in interest than on the original debt.
Credit card companies are obliged to contact you to inform you if you have persistent debt and offer suggestions of how you could clear the debt faster, perhaps by suggesting a repayment schedule. However, if you don't engage with them, you could have your card suspended. If you find yourself in this situation, it is always advisable to face up to it, communicate with your creditors and seek advice. There are more details of where to get help in our article "Where to get free debt advice".
What if I can't afford to pay my credit card?
If your circumstances have changed and you are struggling to keep up with repayments, first consider if you can afford to make the minimum monthly payment required by the credit card company. If you can, without sacrificing payments on essentials like rent or food, try to meet this minimum requirement to avoid incurring additional fees and damaging your credit score.
If, however, you are unable to make any payment on your credit card, look at the following options:
- If your financial problems have been caused by the Covid-19 pandemic, you may be able to apply for a payment holiday for up to three months without it affecting your credit rating. Indeed, as a result of the crisis, lenders have been advised by government to offer extra support to people who are struggling, perhaps by reducing payments for a set period or reworking the repayment schedule. For more information, read our article "Payment holidays for credit cards and loans - should you take one?"
- Explore whether you can move your credit card debt to another card with an interest-free offer. This could give you valuable breathing space and allow you to work out a longer term solution to your problems
- Another option is to consider a personal loan, which could be used to pay off your credit card debt, leaving you with borrowing with a significantly lower interest rate. It may also help to pay off the debt quicker as most loans have a fixed repayment amount as well as a fixed term
As we said above, there are many sources of free debt advice, including the Citizens' Advice Bureau and debt charity Step Change. The key is to be proactive, to tackle the issue as early as possible so as to avoid becoming consumed with growing debts and fees.
Can I get my credit card debt written off?
Looking to get your credit card debt written off is a major decision as it involves insolvency options such as bankruptcy, debt relief orders or Individual Voluntary Arrangements (IVA's). These will have a big impact on your credit file, with potential long-term damage. There can also be fees associated with using these debt solutions, as well as a potential risk of losing assets such as your home or car if you have secured debt.
Before deciding to take this course of action, it is highly advisable to seek high quality impartial advice and to consider what other options may be available to you. You should also be wary of any firms that promise they can get your debts written off by exploiting legal loopholes as they are, at best, misleading and could end up worsening your financial position.
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