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Dealing with Credit Card Late Payments

Dealing with Credit Card Late Payments

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Betsalel Cohen
UpdatedJun 17, 2024
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    4 min read
Key Takeaways:
  • Credit card debt and late payments are on the rise (2rd quarter 2023).
  • Take steps to avoid running up credit card debt.
  • If you are struggling to pay your bills or have late payments, then look for a debt relief solution.

Credit Card Late Payments: Take Count

Holiday season means big family meals, buying presents, and taking vacations. There is a big temptation to pull out our credit cards and make another charge, as well as pushing off payments. That means either paying the minimum payment or even worse making a late payment.

According to the New York Federal Reserve press release credit card debt is on the rise and the number of borrowers making late payments (more than 90 days) increased. Here are a few of the 2023 2nd quarter statistics:

  1. Total credit card debt was more than $1 trillion.
  2. "Credit cards balances saw the most pronounced worsening in performance in 2023Q2 after a period of extraordinarily low delinquency rates during the pandemic."

Over the past few years many consumers have reined in their credit card debt. However, due to consumer confidence, a better job market, or a desire to make more purchases, the credit card debt rates have risen in the last year. The more troubling part is that more borrowers are not making their payments on time and falling further and further behind.

Credit Card Late Payments – the Consequences

Making late payments on your credit card has a few serious consequences, including:

  1. Damage to your credit score: Making late payments on your credit cards results in a negative mark on your credit report. Timely payments on your credit report are the most important factor in getting and maintain a high credit score. Remember, a lower credit score means that you will have a harder time getting a loan (auto loan, mortgage loan, new credit card, or installment loan). It also means that if you get a loan you will pay higher interest rates.
  2. Late fees: Late payments bring with them penalty fees including flat fees and higher interest rates. Those can be very expensive and make your initial purchases turn out to be very expensive purchases.
  3. Credit card balance cut, canceled and no new credit available: Credit cards can be very important tools to make large purchases or emergency purchases. (It is always advisable to plan ahead and have an emergency fund).
  4. Legal action: If you don’t make your payments on time, your late payments can turn into a charge-off and collection item. Either the original lender or a third-party collection agency will put on the pressure for the debt to be paid. This means collection calls, letters and potentially lawsuits.

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Credit Card Late Payments – Deal with your Debt

Credit card late payments can happen to anyone. Emergency medical bills, car repairs, or other sudden expenses are some of the reasons to build up credit cards. Unemployment or loss of income can cut into the ability to make ends meet.

Here are steps to take to make sure you avoid making late credit card payments:

  • Create and maintain a budget. Make sure you understand how much you spend so that you can control your expenses. Also, budget property your savings and retirement accounts.
  • Create an emergency fund. Make sure that you have at least a 6-month emergency fund, in case you have a loss of income or sudden expensive bills. Your emergency fund is not meant to pay for appliances or vacations. Put those into your monthly budget.
  • Avoid minimum payments. By making minimum payments you build up larger credit card debt and greatly increase the amount it really costs to purchase an item. Most credit cards and installment purchases have very high interest rate. Use the Bills.com minimum payment calculator to see how much those purchases really cost you.

If you have already built up high credit card debt, and are making late payments, then it is imperative that you take care of your credit card debt immediately. Finding the best debt relief solution is important, whether it is a cash-out mortgage refinance, personal debt consolidation loan, credit counseling and debt management program, or debt settlement.

In general, if you are struggling to make payments and already have late credit card payments (and maybe mortgage payments too), then getting a new loan is not a realistic option. Late payments and credit card debt can be stressful. Before you sign up for any program, make sure that it is appropriate to your financial situation. Don’t fall prey to high-pressure tactics and avoid making upfront payments for your debt problems.

Did you know?

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Auto loan debt was $1.62 trillion and credit card was $1.12 trillion.

According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

The amount of debt and debt in collections vary by state. For example, in Indiana, 28% have any kind of debt in collections and the median debt in collections is $1721. Medical debt is common and 16% have that in collections. The median medical debt in collections is $748.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.

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