At Risk of Missing a Credit Card Payment? Act Fast to Minimize Impact

When a credit card payment due date is approaching and there’s not enough money, your next move could be critical to your finances.

From refreshing your budget to evaluating debt payment options, creating a plan as early as possible could keep costs manageable and credit scores from plummeting.

Here are a few steps that can potentially keep the situation from spiraling.

Create a realistic budget, which will require knowing all of your expenses. Review debit and credit card statements for purchases like unused subscriptions. Also, explore which expenses can be swapped for cheaper alternatives. If there’s no wiggle room and you’re struggling to afford everyday basics, prioritize essentials while sorting out a debt plan.

Make sure you can fund necessities like shelter, utilities and expenses needed for work such as transportation, suggests Thomas Nitzsche, director of media and brand at Money Management International, a nonprofit financial counseling and education service. To cover these expenses, you may need to make concessions, find ways to supplement income or seek a loan from a loved one.

“You might need to downsize a car or go to a one-car household, or downsize your living situation if your housing is really unaffordable,” Nitzsche says.

Contacting credit card issuers early about your situation might offer some relief. There’s no guarantee, but it’s worth asking.

Get in touch with them before you’ve missed a payment because the creditor may be willing to extend forbearance, allow you to skip a payment, offer a reduced payment or change the due date, Nitzsche says.

Some issuers may also offer a hardship plan that temporarily lowers interest rates if you’re facing circumstances beyond your control, such as unemployment or an emergency.

If you need more help than a creditor may offer, seek the advice of a counselor at an accredited nonprofit credit counseling agency.

“They are going to look at the whole situation — income, assets, monthly expenses, who you owe, how much, what the state of the debt is — to help you decide what path is right for you,” Nitzsche says.

A credit counselor can also review your budget for any missed opportunities, help you work with creditors, offer guidance on when to potentially seek legal advice and more.

Additionally, a counselor will assess whether you qualify for a debt management plan that consolidates eligible debts into one single fixed payment. For a fee, these plans can lower interest rates and waive fees, typically giving you between three to five years to pay down the balance. If it saves money on interest charges over the long term, then it can be worth the upfront cost.

Credit card delinquencies have been on the rise, so if you’re struggling to make payments, know that you’re not alone. More credit card accounts were over 30 days and over 60 days past due in the fourth quarter of 2023 compared with any other quarter since 2012, according to data from the Federal Reserve Bank of Philadelphia.

The domino effect on missing payments can include:

• A late fee. A typical late fee currently is $32, according to the Consumer Financial Protection Bureau’s website.

• Lower credit scores. After a payment is 30 days late, it will typically be reported to the credit bureaus and go on your credit report. The data collected in your credit report is used to calculate your credit scores, and payment history factors heavily into that. 

• A penalty APR. Depending on the credit card issuer, a penalty APR may apply after a payment is 60 days overdue. This interest rate is usually higher than the card’s ongoing interest rate, making it more expensive and difficult to pay. This APR can remain intact for six months on existing balances even after you bring the account current and continue making on-time payments. Terms vary by issuer. 

• A charge-off. After around 180 days (sometimes sooner), an account can be charged off, meaning that it is closed and written off as a loss, but you’re still responsible for paying the balance.

Some of these blemishes stay on your credit report for up to seven years and can make borrowing more expensive or limit your future options.

“Anyone who sees that going forward, anyone who pulls your credit report — which can include other lenders, employers, insurance companies, property management companies, tenant screening — can obviously take it into consideration when they’re making some sort of decision about you,” says John Ulzheimer, a credit expert formerly with FICO, a credit-scoring company, and Equifax, a major credit bureau.

You may also face additional consequences, like the account getting sent to collections or legal ramifications, such as a lawsuit, according to Ulzheimer.