Money Management

Using credit cards wisely is a good way to build your credit score and earn reward points. However, here’s what happens when you miss a bill. 

It’s a terrible feeling. You know you’re forgetting something but can’t quite remember what it is. By the time you remember that you missed a credit card payment, it’s too late. You make the payment but are left to wonder if there will be consequences. Here’s what happens when you forget to pay your credit card.

You’re responsible for interest payments

Any time you pay less than the full amount due on your credit card, interest is added to your balance. And credit card interest is not typically low. For example, the average interest rate on credit cards as of today, according to LendingTree, is 24.45%. That’s the highest average rate LendingTree has recorded since it began tracking credit card interest rates in 2019.

Tip: Unless it’s impossible, repay your credit cards in full each month before the billing cycle is up. That way, you avoid interest charges.

You’re likely to be hit with a late payment fee

Credit card companies add a late payment fee to your balance any time you miss a payment. The average late payment fee is $30 for the first offense and $41 for each subsequent late payment, according to Consumer Reports. Adding late fees to your balance represents a double whammy: You’re that much further away from paying your card off, and you’ll pay interest on the late payment fee.

Tip: The moment you take out a new credit card, sign up for automatic payments so you never have to worry about a late payment. Also, call the credit card company and see if it will waive the late fee. This often works if you’re usually on time and have already paid the late amount when you ask.

You’ll lose out on 0% APR

If the reason you’re using a specific card is that you were able to snag an introductory 0% APR, there’s a good chance the credit card company will cancel the promo APR after the first late payment, and your rate will shoot up to the standard APR.

Tip: Make it a habit to have your payment in several days before it’s due, thereby building yourself a safety barrier. Even if you’re signed up for automatic payments, ask the company to set it up a few days early. You want to do everything possible to protect a 0% APR.

You may be hit with a penalty APR

A missed payment may prompt the credit card company to take another look at your credit profile and bump the rate up significantly. Surprisingly, there is no federal law that limits how much a credit card company can charge in interest.

Tip: If your rate does spike, it doesn’t have to remain elevated forever. Call your credit card company and ask what it will take to move the rate back to where it was. For example, some companies require two consecutive on-time payments.

Your credit score will take a hit

How big a hit your credit score takes depends on how late your payment is. For example, being 30 days late is less damaging to your credit than being 60 or 90 days late. FICO does not share specifics, but it appears that the most severe penalties are saved for those with the highest credit scores. For example, if your credit score is just shy of 800, you’ll see a bigger drop after making a late payment than someone starting with a score of 625. In either case, a single late payment will make a noticeable dent in your credit.

Tip: Once you realize you’ve missed a payment, make at least a minimum payment as soon as possible. What you want to avoid is being 30 days late. Let’s say you end up being seven days late by the time your payment arrives. You’ll still be responsible for paying a late fee, but as long as you’re not more than 30 days past due, you’ll avoid an impact to your credit report.

The phrases “No one’s perfect” and “Life happens” both apply here. The best any of us can do is learn from our mistakes and make moves to prevent them from happening again. And the best way to do that with credit cards is to sign up for automatic payments.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Amazon puts things on sale every day. Read on to see why this writer tries not to get tempted. 

The $139 a year I pay for my Amazon Prime membership is more than worth the money. I frequently take advantage of free two-day shipping and other perks, like the option to try on clothing before having my credit card charged.

Also, I tend to take advantage of Prime Instant Video. And that saves me money because it’s allowed me to ditch other streaming services I used to pay for.

Now, I’ll admit that I sometimes shop on Amazon for convenience rather than freeing up money for my savings account. If there’s an item I can find on Amazon for $10 that I know Target has for $9, I’ll sometimes just buy it on Amazon regardless of the higher price. When there’s a small difference in cost, it’s sometimes worth it to me to pay extra for the time savings. Plus, then I don’t have to spend money on gas.

But often, Amazon has the cheapest price for the things I’m looking for. In addition to its regularly low prices, you’ll often find deeper limited-time discounts on Amazon by checking its daily deals page.

That’s something I used to do regularly, but I’ve since stopped that practice. Here’s why.

When you don’t want to be tempted to spend

When you go to Amazon and click on “Today’s Deals” at the top of the page, you’ll get a list of the many items the site has discounted temporarily. And if you get lucky, you might find a discounted item that happens to be something you need or want.

But I try not to check that page for one big reason — in the past, it’s prompted me to purchase items I hadn’t intended to buy. I’m sure I’m not the only person who’s fallen into the trap of buying something because it’s on sale. But it’s something I don’t want to keep doing repeatedly. So these days, I stay off the daily deals page and I think I’m a lot better off for it.

A better way to save money on Amazon

You could potentially make the argument that if you don’t check out Amazon’s daily deals, you might lose out on the opportunity to score a lower price on something that’s actually a need or want of yours. But I have a better system (at least for me) for saving money on Amazon.

I load my cart with the items I’m looking to buy in the near term, but don’t necessarily need right away. I’ll then save those items for later and keep track of price changes by glancing at my cart every few days.

If I see that a saved item of mine is suddenly available at a lower price, I’ll usually jump and buy it. But that way, I’m not buying something simply because it’s on sale. Rather, I’m buying something I already wanted when it’s on sale.

If you don’t want to load up your Amazon cart with items and save them for later, another option is to create a wishlist. That, too, will allow you to track prices specifically for the items you want.

You may be tempted to check out Amazon’s daily deals page out of sheer curiosity. But know that doing so could lead to impulse purchases that hinder your financial goals. As such, you may want to do what I do and just stay away.

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In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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