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Anyone can make mistakes — just ask my editor. One common faux pas is forgetting to pay a credit card bill. The penalty — a late payment fee — is swift but not too severe.
Cards charge a late fee when you fail to pay the monthly bill by the due date. You are penalized for payments missed, which means coughing up more money, making it a little harder to get out of debt.
What’s worse is that your credit score can decrease, thwarting easy access to future loans and credit cards. Timely bill payments will help protect you from late fees and possible damage to your credit profile.
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Understanding Late Payment Fees
Knowing about late payment fees is essential because they increase your debt. Late payments can harm your FICO credit score and cloud your future efforts to finance debt.
What Constitutes a Late Payment
A late payment is when you fail to pay at least part of your credit card bill by its due date. Even if you’re late a day, it’s a late payment. Card companies set the due date to know when to expect to collect your money.
They use a carrot-and-stick approach: The grace period is the carrot, and the late fee is the stick.
Grace Periods and Minimum Payments
Credit card companies almost always provide a grace period. It is the interval between the end date of the credit card billing cycle (the statement date) and the date the payment is due. Billing cycles typically run around 30 days each, give or take.
By law, if a credit card gives you a grace period, it must be at least 21 days long. During this period, to avoid a late fee, you must pay at least the minimum due, usually 1%-5% of the balance on the latest statement.

You will avoid paying interest on eligible purchases if you pay your entire statement balance by the due date. However, the issuer will suspend the grace period if you pay less than the total balance or if your payment is late.
This results in the card immediately charging interest on your existing balance, including the new purchases you make. The moment you pay the total amount you owe, the card reinstates the grace period, and you can again avoid interest by paying your entire statement balance by the next due date.
Unprocessed Payments
Sometimes, you pay on time, but it doesn’t go through. This may result from insufficient funds in your bank account or from technical glitches (i.e., failures in the payment system).
Even if you make a well-intended payment on time, the credit card issuer may consider it late if the money transfer is incomplete or delayed. Confirm that your payment has gone through to avoid late payment fees.
Common Late Payment Fee Amounts
Credit card late fees were traditionally $25 to $41 per occurrence. In March 2024, the Consumer Financial Protection Bureau (CFPB) finalized a rule to reduce excessive credit card late fees and help close a giant loophole that big card issuers have exploited.
This new regulation cuts the average late fee from $32 to $8, saving approximately $220 a year on average for the more than 45 million charged with fees each year. This will reduce the bloated fees currently raking American families to the tune of $14 billion annually.
According to the CFPB’s estimates, American families will save over $10 billion in late fees annually once the final rule goes into effect.

The rule will apply to the largest credit card issuers (i.e., those with more than 1 million open accounts). Altogether, these companies account for more than 95% of outstanding balances on credit cards. The CFPB reports show that smaller issuers, by contrast, tend to charge their borrowers less on average.
In addition, the CFPB rule will eliminate the automatic annual inflation adjustment to the $8 late fee threshold and force credit card issuers to show their math for calculating late fees based on the actual collection costs they incur.
Nothing in this rule changes the ability of a credit card issuer to increase interest rates, cut credit lines, or implement other measures designed to discourage consumers from making late payments. Indeed, the rule may incentivize credit card companies to encourage on-time payments by devaluing a business model based on late fees.
How Issuers Communicate Fees
Credit card issuers mail or email customers monthly billing statements describing account activity and any fees — these statements detail fees such as late payment charges, annual fees, and interest. Statements itemize each fee so you know exactly what you’re billed for.
In addition to monthly statements, the law requires issuers to provide you with disclosures when you first open an account. These detail all potential fees, interest rates, and how issuers determine those fees. Read these disclosures carefully to make sure you understand what you will be responsible for.

Periodically, card issuers may alter their terms, such as by raising fees or interest rates. They must let you know about this in advance when it takes place. They usually notify you about 45 days before the changes take effect.
This requirement allows you to see new terms and decide whether to continue using the card. The notice describes what’s changing so you know exactly what will be different and when it will take effect. Statements, notices, and advance alerts from the issuer keep you in the know (if you actually read them) and in control of your account with no surprise fees.
What Happens After Making a Late Payment
Payments are better late than never. If you make a late payment, you will trigger a late fee (note that Discover credit cards don’t charge a late fee on the first occurrence). The lender may raise its interest rate on you, making your debt costlier.
What’s crucial is to pay within 30 days of the due date so the issuer doesn’t report your delinquency to the credit bureaus and damage your credit score.
Potential Interest Rate Increases
Late payments can lead to increased interest charges, especially if you are in a promotional period. Compounding of interest worsens the impact.
Penalty APR
Many credit cards, especially those for subprime credit consumers, impose a penalty APR (typically 29.9%) when your payment is late. The penalty APR replaces your regular rate and remains in effect indefinitely.

Moreover, most lenders will cancel the deal if you miss a payment during a 0% APR promotional period: The opportunity to pay no interest during the promotional period evaporates. In such a scenario, the lender immediately charges interest using the regular or penalty APR. This adds to your debt because you must now pay interest on balances you thought would be interest-fee.
Compounding Interest Effects
Compounding worsens the damage of higher interest rates. Compounding interest means you pay interest on the interest you owe. So, if your interest rate has risen because of a late payment, you must spend more monthly on interest charges. Daily compounding is the standard in the credit card industry.
Over time, compounding can cause your debt to increase at a quicker clip. After all, every month, the interest you already owe is piled onto your total, and you then begin making interest payments based upon this new, higher balance.
This creates a debt spiral from which it is increasingly challenging to get out of, leading to more financial problems.
Example
Suppose you purchase $3,600 of furniture with a new credit card that has an 18-month introductory 0% APR. You budget repayments of $200/month to eliminate the balance by the time the promotion expires:
18 months x $200/month = $3,600 repaid
However, you missed the payment date for the seventh month, when your balance was $2,400. The credit card company cancels your 0% APR and hits you with a penalty APR of 29.9%, compounded daily (i.e., approximately 2.49% monthly).
How much extra will you have to pay in interest over the next 12 months if you want to continue to reduce the principal by $200/month? The following amortization table shows the answer:
Month | Starting Balance | Interest for Month | Principal Payment | Total Payment | New Balance |
---|---|---|---|---|---|
7 | $2,400 | $59.69 | $200 | $259.69 | $2,200 |
8 | $2,200 | $54.71 | $200 | $254.71 | $2,000 |
9 | $2,000 | $49.74 | $200 | $249.74 | $1,800 |
10 | $1,800 | $44.77 | $200 | $244.77 | $1,600 |
11 | $1,600 | $39.79 | $200 | $239.79 | $1,400 |
12 | $1,400 | $34.82 | $200 | $234.82 | $1,200 |
13 | $1,200 | $29.84 | $200 | $229.84 | $1,000 |
14 | $1,000 | $24.87 | $200 | $224.87 | $800 |
15 | $800 | $19.90 | $200 | $219.90 | $600 |
16 | $600 | $14.92 | $200 | $214.92 | $400 |
17 | $400 | $ 9.95 | $200 | $209.95 | $200 |
18 | $200 | $ 4.97 | $200 | $204.97 | $0 |
Totals | $387.97 | $2,400 | $2,787.97 |
In this example, making the seventh payment late incurs an extra $387.97 in interest charges (and an $8 late fee). That’s a good reason to always pay on time.
This simplified example excludes additional interest-free purchases you would have enjoyed during the 18-month promotion. It also assumes your budget only permits you to repay the principal at the same $200/month rate despite the higher interest rate.
On the other hand, the damage would be minimal if you repaid the entire balance in the seventh month and all new balances each billing cycle. You could also consider replacing the card with one having an interest rate below 29.9%.
Possible Credit Limit Reduction
The issuer may reduce your credit line if you have been lapsing on payments to your credit card. That means your given available credit limit is reduced. So, now, you will have less credit available to use in the future.
This also reduces your credit limit relative to your credit card utilization ratio. The ratio considers how much you use your credit and how much is available. The credit utilization rate increases as the credit limit goes down while the balance remains constant. A high credit utilization rate can damage your credit score. A low credit utilization ratio helps you achieve a higher credit score.
Credit Score Implications
If you miss a payment, the credit card issuer can report you to a credit bureau. Typically, payments must be 30 days late before this happens. Shortly after it is reported, your credit score will go down. How much damage is done depends on how late the payment is.
Credit card companies report late payments in degrees. Reports begin after 30 days. If you’re still behind by 60 days, more reports follow; again, at 90, once more at 120.
If you don’t pay for 180 days, the issuer likely will charge off the account, meaning the lender writes off the debt as a loss, further damaging your credit score.

Late payments damage your score more than some other negative marks. For instance, late payments cause more damage than the hit from a single hard inquiry when you apply for new credit. But a late payment won’t hurt your score as much as a bankruptcy or a foreclosure. Consistently making on-time payments will help you improve your score over time.
How to Avoid Late Payment Fees
You can take steps to avoid late payment fees. Even though the CFPB recently cut the permitted fee, you still want to prevent it. Here are some strategies that can help.
Make Timely Payments
Timely payment is a must, not just to protect your credit history and scores but also to protect yourself from credit card issuers that charge you a late fee if a payment is posted even one day past the due date.
Late fees are a nuisance. Some issuers will offer to waive the fee for the first instance of a late payment, but most issuers won’t. These late fees add up quickly over time, especially if you have multiple credit cards. But for the most part, the fees are avoidable.

One precaution is to set up automatic bill payments. You can permit the card issuer to draw money from your checking account if payment isn’t received by the due date. You have a few options regarding the payment size: Specify the minimum amount due, an arbitrary amount, or the total balance. This neatly sidesteps the risk of missing a payment date.
In addition to setting up automatic bill pay, know all of your due dates. Write them on a wall calendar where you’ll have a visual reminder, and sign up for text and email alerts through your credit card issuer.
Manage Due Dates Effectively
Maintain an explicit payment schedule. Documenting the due dates of all your credit cards will teach you to manage your credit cards effectively. Put this schedule in a place where you’re likely to see it every day. Make a mark on the calendar for a couple of days before the due date.
Applications for personal financial management, such as Quicken, help remind you of upcoming payment dates. You can set reminders to make payments before the due date. You can even enable the app to issue automatic payments to avoid missing your due dates.

Designate making credit card payments a priority. In other words, reserve funds first for these payments. Ensure you have enough money to cover the payment by its due date. Then, pay promptly and avoid late fees.
Be Proactive If You Deal With Financial Hardships
Act before your financial distress becomes overwhelming by communicating with your credit card issuer. If ever financial difficulty has you by the throat, don’t hesitate to speak with your credit card issuer.
Most significant issuers offer hardship programs and alternatives to consider, like skipping your payments, lowering the monthly payment amount, or some other plan.
Read more here to get specifics and bank contact info.
Regardless of which bank issues your credit card account, contact it when things become problematic. While the account is still with the original issuer, you may be able to settle on something agreeable to both of you.
You will have much broader leeway in your choices if you act before the account reaches default status. There is no one-size-fits-all hardship plan for every person and every bank. You must get on the phone and negotiate what works best for both parties.

All credit card issuers want the same thing: For you to make your payments so they can recoup the money they loaned you. And as a cardholder, that is likely your goal as well.
In addition, financial counselors can provide valuable advice. They offer debt management, budgeting, and ways to improve financial health. Look for well-respected counseling services that offer tailor-made solutions. Many not-for-profit organizations provide low-cost or free counseling to people who need it.
Late Payment Fees Can Harm Your Budget and Credit
Late payment fees can quickly damage your budget. When you miss a payment, the late fees add extra costs you didn’t plan for. These fees can pile up, making it hard to pay off your debt. This can leave you with less money for other important expenses.
Missing payments also hurts your credit score. Your credit score drops when you pay late. A lower credit score makes it harder to get loans or credit cards in the future. It can even lead to higher interest rates, costing you more money in the long run.