Each month, your credit card issuer will send you a bill specifying the total amount of charges you made the month prior, plus a required minimum payment. You typically have 21 days or longer from the time the issuer sends it to pay off the bill. Pay it off in full and you won’t accrue interest—it’s like you start fresh the next month. If you make the minimum payment by the due date, you’re still in the clear. Of course you’ll begin accruing interest, but luckily you won’t incur any extra charges or fees.

If you pay your credit card bill late, make less than the minimum payment, or don’t pay at all, you will be hit with a late fee, which can cost up to $40. Unfortunately, a late fee is the least of your worries in this instance. Failing to make a minimum payment could also lead to:

  • Damage to your credit score
  • Penalty APR
  • Loss of access to rewards and benefits

Here’s how each of these is brought on by a late payment.

Damage to credit score

If you miss a payment or don’t pay the full amount, your issuer will notify three major credit reporting agencies—Equifax, Experian, and TransUnion; however, the issuer will not send the late payment to the bureaus until your minimum payment is 30 days past due. In this case, it’s crucial to make the minimum payment as quickly as possible. It could make the difference between an annoying late fee, which could potentially be waived, and a staggering 100-point drop in your credit score.

Read more about how to salvage your credit score if it takes a hit due to a low payment.

Penalty APR

A credit card’s APR is the rate at which interest will accrue when you don’t pay off your full balance each month. If you don’t even make the minimum payment by your due date, your credit card company can increase your interest rate to a penalty, or default, APR, which is applied to all future purchases. According to the U.S. News & World Report, a typical penalty APR is 29.99%, up from an average standard APR of 16.61%. If you fail to make a minimum payment within 60 days of the original due date, your issuer can also apply the penalty APR to your current balance.

The Credit CARD Act of 2009—which protects cardholders from deceptive bank practices by regulating rates and terms—can come in handy when it comes to penalty APR. Unless you’re 60 or more days past your due date, a late payment cannot trigger a penalty APR within the first 12 months of your credit card agreement. The law also mandates that issuers reassess the inflated rate if you make six consecutive on-time payments.

Frozen rewards and loss of benefits

Likely the least financially draining—but equally as frustrating—consequence of a late credit card payment is forfeiture of promotional benefits and temporary loss of access to rewards. If you’re in the introductory period of your interest-free-for-12-months credit card and miss a payment, you might lose your 0% APR on purchases and balance transfers. And if you have cash back or travel rewards saved up, your issuer will likely freeze them until you’re caught up on payments.

You’ll also lose your grace period—the time between the end of your billing cycle and your payment due date when your balance and any purchases don’t accrue interest. With a late payment, you will automatically begin accruing interest not only on your principal balance, but on your late fee and eventually penalty APR if too much time passes.The good news is that you can get your grace period back, however specific requirements vary by issuer. Often, you have to make several consecutive on-time payments before your issuer will reinstate your grace period.

The bottom line

Whether you’re facing a penalty APR, damage to your credit score, or frozen rewards—or all of the above—as a result of a late credit card payment, speed and consistency are key. With a penalty APR: It’s important to pay off your balance quickly so interest doesn’t begin accruing on the penalty APR, and continue making the minimum payment each month so the bank has to reassess your inflated rate sooner rather than later. If your credit score might be impacted by a late payment, pay off at least the minimum balance as quickly as possible because, remember, your issuer won’t report a late payment until you’re at least 30 days overdue. And with frozen rewards, it’s in your own best interest to pay off your balance so you can once again have access to your rewards and benefits—you earned them after all.

Last Updated on September 19, 2023