Just one day late can hurt that credit card rate

Some card issuers will raise APRs for a single day's dalliance

By Todd Ossenfort

The Credit Guy

The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues. Ask a question 'The Credit Guy' archives

Dear Credit Guy,
When I am about a week late paying on my credit cards, will it hurt my credit even if it is not 30 days late? Also, will it hurt my credit for regular bills like Qwest or other house utility bills? -- Angelica

Dear Angelica,
"Never do today what you can put off until tomorrow" is not a good motto to live by.  The simple answer is no, paying your credit card bills a week late should not affect your credit. Creditors will generally report late payments only if they are 30 days or more late. However, worrying about how the late payment will affect your credit should not be your only concern.

What is much more likely to happen, if it hasn't already, is that your card issuer will raise your interest rate on your account due to the payment being late. With some card issuers, a payment even one day late can trigger an increase in the interest rate (APR). Paying late is a red flag for risk and an increase in risk to the card issuer typically means an increase in the cost of the credit provided to you. The issuers' penalty rate for late payers can be as high as 30 percent. Check your credit card statements for how much you are being charged in interest on your balances. Late fees assessed to borrowers are a major source of revenue for credit card banks.

Should you receive a notice in the mail from your creditor that your interest rate is being raised, and you have the option to opt out of the change, give it some consideration. The account will be closed, but you will be able to pay off any remaining balance at your current interest rate and not the likely much higher one. You just need to let the creditor know in writing that you are opting out of the change. I suggest you send the letter certified mail with a request for return receipt by mail or online.

As I write this, opting out of an interest rate increase is a privilege that not all credit card issuers grant. But on Aug. 20, 2009, a provision of the Credit CARD Act of 2009 goes into effect, giving you the right under this federal law to opt out of rate increases. There are exceptions though, and a big one is that card issuers will still be free to hit late-payers with rate increases. So don't be one.

I would strongly recommend that you spend some time looking at your personal financial situation or bill paying system to avoid paying late in the future. If you don't have a spending plan or budget, then that should be your first step. You need to know where the income that you earn is going. Unless you know for sure, you aren't in complete charge of deciding how it is spent.

You should know your major monthly expenses such as rent, mortgage, car loan, car insurance and utilities. Where you may have leaks in your spending and not be aware of it is the other budget categories such as food, entertainment and clothing. Most people are shocked to learn how much money they spend eating out and on entertainment.

For one month, keep track (write down or input) of all your spending (all members of the family), including that $20 of walking around money you have in your wallet one day and aren't sure where it went the next. Once you have all your expenditures for the month, you'll have a good idea of where you can make any necessary changes to assure you manage your income and pay all your obligations on time.

If you are paying late because you are having trouble making the payment due to not enough income, then you might consider getting some professional help from a qualified credit counseling agency. Your counselor will review your finances and make recommendations based on your particular situation. You can find an agency you can trust at the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling.

Take care of your credit!

See related: Not all issuers allow you to opt out of rate increases, How to opt out of credit card rate increases, Have you been 'rate-jacked'? Here's a sample opt-out letter

Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.

The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week. Send your question to The Credit Guy.

Published: August 17, 2009

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