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About Credit Card Payments
U.S. credit cards generate a statement every month. The statement shows your total amount owed as of the statement date (new balance), the minimum amount you need to pay (Minimum Payment), and the payment due date (due date).
If the total amount owed is relatively high, banks usually set a minimum payment of about $20-$40 that must be paid before the due date, or else a late fee will be charged. Keep in mind that any remaining balance will accrue interest if you do not pay it off, even though no late fee will be charged. So unless there is a special reason, it is best to pay the full balance. For example, on my February statement below, I owed a total of $76.73 and had to pay at least $40 by February 3, or I would be charged a late fee. If I only paid $40, the remaining $26.73 could still accrue interest.
If your total balance is relatively small, then the full amount must be paid off by the due date. For example, my February statement was $19.84, and it all had to be paid by April 3.
If you still have questions about how to make payments, please see:
What happens if you miss the due date
Credit card statements usually list the due date. If you accidentally miss that date, what are the consequences? They can be summarized in five main points:
- Late fee: ranges from $0-$40, depending on the bank
- Interest starts accruing: interest begins on the unpaid portion of the statement balance, at a rate determined by your APR, up to 30%
- APR increase: your rate may be temporarily raised, up to 30%
- Loss of the next statement's Grace Period: normally, your next statement can be paid by the statement due date without interest. But after this, interest starts accruing as soon as you make a purchase
- Impact on your credit history and score: if the minimum payment is still unpaid after 30 days, the bank may report the missed payment to the credit bureaus, which can affect your credit history and score
However, the exact combination of consequences varies by situation. Depending on how much you paid, the cases can be divided as follows:
- If you did not pay, or did not pay the minimum due, by the due date and still had not paid it off within 30 days: late fee, interest charges, APR increase, loss of the next statement's Grace Period, and impact on credit history and score
- If you did not pay, or did not pay the minimum due, by the due date, but paid the minimum due within the following 30 days: late fee, interest charges, APR increase, and loss of the next statement's Grace Period
- If you paid the minimum due by the due date, but did not pay the full statement balance: interest starts accruing on the unpaid portion, and you lose the next statement's Grace Period
- If you paid everything off before the due date: no interest is charged, and you continue to enjoy the grace period
Next, let's take a closer look at a few key terms.
Late Fee
Most credit cards have a late fee, ranging from $0-$40. If you have not paid at least the minimum payment by the due date, the bank will automatically charge a late fee. Below is Chase's explanation of the late fee in its statement. The exact late fee charged depends on how much you owe, and it is generally not more than the amount you owe. But as long as you pay the minimum amount, this late fee will not be charged.
Late Payment Warning: Minimum Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a late fee of up to $40.00 and your APR's will be subject to increase to a maximum Penalty APR of 29.99%.
Some banks do waive the late fee. For example, Apple Card says that they do not charge a Late Fee.
Sometimes the bank may also show leniency. If you only miss the due date by 1-2 days, they may waive the late fee. I was one day late paying my Chase card recently, and I got charged a late fee, but after I made the payment, they actually removed the late fee.
Interest Starts Accruing
If, before the due date, you do not pay off the full balance shown on the statement, the unpaid portion will start accruing interest from the due date. The interest rate is usually listed on your statement. For example, this card shows an annual rate of 18.99% on purchases, and dividing that by 365 gives the daily interest rate. Interest is calculated every day on the unpaid balance, but the total amount of interest is only shown on the next statement date. Don't be fooled by the fact that you do not see interest listed for a few days—the bank is keeping track of it.
APR Increase
If you do not even pay the minimum before the due date, the bank may consider you high risk and may increase your annual percentage rate. Chase states in the statement that this APR can rise, up to 29.99% (most cards are somewhere between 10% and 18.99%, depending on the card).
Late Payment Warning: Minimum Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a late fee of up to $40.00 and your APR's will be subject to increase to a maximum Penalty APR of 29.99%.
So failing to pay the minimum due can mean a double penalty: you are charged a late fee, and your interest rate goes up as well.
Loss of the Grace Period
We already covered the Grace Period in detail in "When should you pay your credit card bill?". In simple terms, if you paid off the full statement balance before the due date last month, then you get a grace period this month. If you did not pay it off, you lose the grace period. For example, suppose:
- On January 1, you bought $100 on Amazon, and the closing date for this statement was January 15.
- On January 15, you saw that your Statement Balance was $100, the due date was February 13, and the minimum payment was $35.
If by February 13 you only paid $99, then after the February 15 closing date, your statement will show the $1 you did not pay, plus interest. At that point, all purchases you make after February 15 will no longer have a Grace Period. In other words, if you continue shopping on Amazon on February 17 and spend $50, that $50 will start accruing interest immediately from February 17.
But if you paid the full $100, then an Amazon purchase on February 17 would not start accruing interest immediately. Instead, it would wait until the March 15 statement is issued, and only after that statement's due date would interest begin to accrue.
So if you miss a payment deadline even once, then even if you catch up later, it is best not to use that card for purchases the following month. Without a grace period, every purchase starts accruing interest on the day it is made.
Impact on Credit History and Score
If you miss a card payment due date, the bank usually will not report the missed payment to the credit bureaus right away. Around 2021, I once forgot to make a payment and the account went past due, but I noticed it about 3-4 days later and paid it off immediately. Looking at my credit report, there was never even a single instance showing past due.
But if it goes beyond 30 days and still isn't paid off, this record may be reported to the three credit bureaus. A missed payment can have a big impact on your credit score, especially when you're applying for a loan. Some banks will specifically ask why you missed a payment, and your loan interest rate may go up as well. Negative credit records can stay on your report for 7 years, so the long-term impact is real. Also, if you go several months without paying, the bank may close your card and send your bill to a collection agency. That collection record can send your credit score plummeting, and it also stays on your report for seven years.
What should you do if you forget to pay?
When you have too many cards and are busy, forgetting to make a payment is pretty common... I personally have forgotten to pay two or three times, and later made up the payment right away. I was also charged a late fee once or twice. How you handle it depends on how long you missed the due date.
Within 30 days
Within 30 days, in general your missed payment record will not be reported to the credit bureaus, and you just need to pay right away. It is recommended to use the fastest payment method possible, such as paying from a checking account at the same bank as your credit card, which is usually faster. You can also call the credit card company and ask which method can get the payment through the fastest, since interest accrues every day. Also, if this is your first missed payment, you can call customer service, explain why you missed it (for example, you were too busy and forgot, or the internet was bad), and ask them to waive the late fee. Customer service will usually waive it.
In addition, because you paid after the due date, there will be no grace period next month. So after you pay it off, put this card away and wait until the month after next, when you have a grace period again, before using it. Otherwise, interest will be charged on every day of the balance, which is too costly.
After 30 days
If you realize more than 30 days later that you still have an unpaid balance, first, if you have the money, it is still recommended to pay it off as soon as possible. Then contact the bank to explain the situation and see whether they can avoid reporting the missed payment to the credit bureaus. At the same time, it is recommended that you check your credit reports to see whether there is any related information. You can get free reports from all three credit bureaus,
If you find a missed payment on the report, you can consider contacting customer service and seeing whether the credit card company can help remove this item.
Transferred to collection
If you have gone through several statements without paying, the bank may forcibly close your credit card. If you still do not pay, your bill will be transferred to a collection agency (collection). Don't think this kind of situation is rare—actually, quite a few international students leave the U.S. and their credit cards are still open. If there are long-term subscriptions charged to that card and you forget to cancel them, it can easily lead to a long-term unpaid balance.
If your debt is sold to collection, a collection entry will appear on your credit report. Compared with banks, collection agencies are relatively easier to negotiate with. If you can contact these collection companies, you can try bargaining to pay less. Or you can try to negotiate a pay-to-remove arrangement for the debt record. Since collection records stay for 7 years, loans and similar products will probably be very difficult during these years.
How to avoid forgetting to pay
Automatic payments
Most banks offer automatic payments (auto payment), which lets you set a scheduled time to pay the balance on your credit card. Here, note that each bank has a different way of setting the automatic payment date. Some let you base it on the due date, and you can set it to a few days before that date; others are based on the statement date, and you can set it to a few days after that.
Financial management platforms
When you have a lot of cards, it is still possible to miss a payment. You can also choose some financial management platforms and add all of your credit cards to them, so it becomes easy to see your cards' balance and how much you need to pay. I used Mint before, and now I use Personal Capital. It's still pretty useful.