Impacts of late payment on your credit card agreement

Posted by Kelly Luff in Personal Finance on 20 February 2017 - Kelly is a Marketing Executive at checkmyfile

We’ve all done it before – had that mad panic when we’ve forgotten to pay a bill. But what happens if you do forget to pay your credit card by the monthly repayment date?

A few weeks after Christmas I received a late payment letter from my credit card – I’d logged in, thought “I’ll need to make that payment” but then never actually logged back in and paid my credit card.

Cue a quick call to the card provider, who explained the £12 late payment charge to me whilst I asked if a late payment marker would appear on my credit report, as this could then impact on my credit score and future ability to get the best rates.

No it wouldn’t show on my credit report if it was paid within the month, the advisor explained, but it would mean that I’d broken the conditions of the agreement and therefore any complimentary terms would end with immediate effect.

Even as someone that works in the financial industry, I hadn’t thought of this as a consequence of my late payment – they do after all offer me the opportunity to pay a minimum payment of £6, so surely getting the repayment a few days late doesn’t impact on my assumed ability to pay overall?

The card I held offered a generous balance transfer and purchasing period at 0% interest – I’d assumed I’d be keeping the card until I’d finished off paying the modest balance whilst missing any interest payments. Suddenly, I’d have to pay interest from the moment the payment was missed and even though it was a relatively small amount each month, it really annoyed me that I’d now have to look at paying more money on top for what I thought was an innocent mistake.

But I’d broken the original credit agreement with the lender, and lenders only offer benefits like these to customers if they can be trusted to repay them. For instance, those with poor credit scores will always have difficulty getting this type of 0% interest deal, so the onus is on you to ensure you honour the credit agreement in full to ensure that you continue to get preferential conditions.

It did make me think – I’d never read the Terms & Conditions in detail as I never had any intention of doing anything other than making the payments in full and then closing the card. It does stipulate quite clearly that interest-free periods will come to an end when you break the conditions of the contract you’ve signed within the terms.

In the end it meant applying for another card, balance transferring the outstanding amount over, and calling the old card provider to work out how I pay the 3p interest that I accrued.

If I’d made too many applications lately for credit, or been at the top of my affordability already, it might have made opening a new card more difficulty and I could have been left just paying the interest each month because of a silly oversight on my part.

So, read the terms and conditions BEFORE you sign a credit agreement, so that you are aware of what is required of you as the borrower, rather than only looking at what the lender is offering you.

And make sure that you pay your card bill on time, even if it’s just the minimum repayment, either by setting up a Direct Debit or setting a reminder for the bill each month.

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