|Paying late can bring your score down|
Credit Card Company Reporting Programs
Credit card companies maintain automated programs to report your payment history to the credit bureaus. These programs keep a log of your credit card balance, when you make payments and how much you pay each month. The credit card company doesn't automatically send new information to the credit bureaus every time you make a purchase or payment. The automated system uploads data at very specific times. The state of your account at the time of the update dictates the information that ultimately appears on your credit report.
|Keep track of payment due dates|
For the sake of argument, lets say your roommate Joe's credit card payment is due at the first of the month and his credit card company also updates its data with the credit bureaus on the 15th. Joe pays his bill on the 14th (paying on the day the system updates is too big a gamble). Although Joe's payment was two weeks late and yours was only five days late, he's in the clear while you end up with a glaring black mark on your credit report and a tarnished credit score. It all depends on when the system updates.
Late Payments and Interest Rate Increases
|Watch out for higher interest rates|
The good news here is that The CARD Act requires credit card companies to review any accounts that have incurred an interest rate hike after six months. If you're paid all of your payments on time and been an all-around exemplary customer, they have to restore your original interest rate within 45 days of the review.
Credit Card Late Payment Fees
If you pay your credit card bill late – even a single day late – you can expect your credit card company to slap you with a fee. The federal government caps these fees at no more than $25 ($35 if you've had a previous late payment in the past six months). If you carry a low balance and your minimum payment is lowers than $25, your credit card company cannot charge you a late fee that exceeds your minimum payment. In case you're wondering, this is why so many credit card issuers are raising consumers' minimum payments to $25 regardless of how low their balances are.
Ultimately, paying your credit card bill even a few days late is playing a game of Russian roulette with your credit. I don't normally advocate giving credit card companies access to your bank accounts, but if you can't seem to remember to pay your credit card payment on time, setting up an automated draft with your bank can help protect you from fees, interest rate increases and, most importantly, the credit damage you could potentially incur by paying your credit card bill several days late.