What happens if I don't pay my credit card bill on time?

While it’s not an ideal situation to be in, missing a credit card bill can happen to the best of us.

Failing to pay your credit card bill will have consequences, and they will only get more severe (and more expensive) as time goes on.

If you’re worried you may not make your next bill payment in time, or if you’re already late, it pays to be prepared.

The first thing you can expect when you miss a credit card payment is to be hit by a late payment fee. This fee will appear on your statement if you fail to pay the minimum repayment amount on your credit card.

Late payment fees can reach as high as $35, although some cards do not charge late payment fees.

It’s worth comparing $0 late fee credit cards if you are prone to late payments, or just for peace of mind. Use our credit card comparison tool to research low or zero late payment fee credit cards.

Another consequence of missing a payment is that your lender could increase your interest rate on your credit card while payment is still outstanding. This could make your balance even costlier to pay off. The longer you stay in debt, the more interest you’ll be charged.

Worst of all, if your missed payment affects your credit score, future lenders may charge you a higher interest rate, particularly if you take out a home loan or a personal loan.

Your interest-free days for your credit card’s billing cycle won’t reset until you’ve paid your balance in full and on time for two statement periods. If your credit card payment is overdue, you’ll have to pay interest for any purchases made during that statement period.

If your credit card has a rewards program, such as earning points on purchases, you may lose access to these benefits until your card is paid.

Unfortunately, a late credit card payment does affect your credit score.

If one or more of your repayments are significantly overdue, these late payments may be reported to credit bureaus, such as Equifax, Experian, and illion.

There are three different ways late payments are recorded and affect your credit score:

• Late payments: If your payment is more than 14 days past the due date, this may be recorded on your credit report as a ‘late payment’. This can stay on your credit report for up to two years.
• Default: If a payment worth more than $150 is more than 60 days overdue, this is listed as a default on your credit history. However, before reaching this point, most lenders will take steps to collect part or all the outstanding debt, such as sending you written notice. A default remains on your credit report for five years.
• Serious credit infringement: This is when an individual owes a debt to a credit provider and has not contacted them for six months or more, despite attempts by the credit provider to contact them. The individual has left, or appears to have left their last known address without paying the debt and without providing their new or forwarding address. This infringement will remain on your credit report for seven years, unless payment is made. In that case, it will revert to a default and stay on the credit report for five years.

If your credit card is more than 180 days overdue, the lender may choose to cancel your credit card. While this means your debt doesn’t increase further due to interest charges, you’re still obliged to pay it back to the lender.

After reporting your debt to a credit bureau, your lender may forward this on for a debt collector to chase. This is not ideal as not only will it negatively affect your credit score, but may add a lot more stress to your situation. 

Dealing with debt collectors doesn’t have to be difficult. For example, there are restrictions on the days, frequency, and platforms that debt collectors can contact you, such as national public holidays, or over social media.

Remember, it is against the law for debt collectors to threaten, intimidate or harass you, or to make false/misleading statements.

• Pay at least the minimum each month: While it won’t pay off your credit card debt for a long time, making the minimum required credit card repayment can help keep your credit card from affecting your credit score.
• Contact your lender about an extension or hardship variation: Credit card lenders don’t want you to default, and may be able to help you organise a payment plan or other alternative ways to get on top of your debt.
• Consider a balance transfer: Moving your debt from your current credit card to another card that charges 0% interest on the transferred balance could help to keep your debt from growing faster than you can afford to repay it. Just keep in mind that these interest-free balance transfer deals usually only last a limited time, after which you’ll start being charged interest again.
• Get financial counselling:Visit MoneySmart to search for a financial counsellor in your area, or contact the National Debt Helpline.