Steve Bucci has been helping people decode and master personal finance issues for more than 20 years. He is the author of “Credit Management Kit For Dummies,” “Credit Repair Kit For Dummies,” “Barnes and Noble Debt Management,” co-author of “Managing Your Money All-In-One For Dummies” and “Debt Repair Kit For Dummies” (Australia). Steve is an experienced expert witness in identity theft, credit scoring and debt related cases. He has been a presenter at the FICO InterACT Global Conference, the Federal Reserve and the International Credit Symposium at Cambridge University in the UK.
I forgot to pay my annual fee. Will it hurt my credit?
If you forgot to pay your annual fee and 30 days have passed, your issuer may report it as late and it will damage your credit score. After you have paid it, contact your issuer to explain the situation. Then, ask if they will waive any late fees or interest charges and update your account status to “current” with the credit bureaus.
Dear Keeping Score,
Hi, I’ve had A-plus payment history for over 12 years. I paid off a credit card and completely forgot about the annual fee. When I logged into my bank I was horrified to see the “posting date” for the fee was Oct. 31, which means I believe the payment was either due Dec. 21 or 31. The posting date isn’t the due date, correct?
Anyway, I paid it Jan. 3, which means it was roughly 13 days or so (if it was due the 21st) that it was over the 30-day mark. The bank said it was reported as delinquent but that it might not show up on my credit. Any advice? –Justin
First, some practical advice, then I’ll give you some background.
I suggest you call the credit card customer service line. Explain that you have been a great customer for over 12 years and that you didn’t realize the annual fee was due. As a result, you paid what you thought was the full balance, only to find you missed the fee. When you discovered your mistake, you immediately paid the fee, but it was late. Ask if they will waive any late or interest charges in light of the fact that it has now been paid. Also ask that the account now be reported as current with the bureaus.
I can’t imagine they will risk your long relationship over next to nothing. If the rep can’t help you, thank them for trying and ask to speak to a supervisor. Supervisors have more sweeping powers than reps and should be able to make this problem go away. Now, if they refuse, you have the option to ask to speak to someone about cancelling the card. Usually, this is another department charged with rating customers.
You don’t have to cancel anything, but now you’ll be speaking to someone whose job it is to keep you as a customer. They may have the incentive and the means to meet your request. If you actually decide to cancel the card, just be careful to use or transfer any rewards points that may have accrued to the card before you cancel it. I’ve made a few payment mistakes myself and this approach has always worked for me in the past.
Tip: Will your credit score rise after 12 months with no late payments? There’s no scoring bonus for making a one-year milestone of on-time payments. However, if all other factors that go into your credit score are positive, you should expect your score to reflect this.
Posting, closing and payment dates defined
Now, here is some background to help you and other readers better understand posting and payment dates. You are correct that the posting date is not the same as the due date.
The CreditCards.com glossary defines post date this way: “In credit card terms, the post date is the date upon which cardholders’ purchases are recognized on the books of their credit cards’ issuers.”
So, it’s important to know your account’s closing date. The time between when your account closes for the month and when your payment is due is known as the grace period.
Cardholders generally have 21-25 days of grace during which, if they pay their balance in full, no interest will be charged on the purchases made during the billing cycle. This interest-free grace period will only apply if you are not carrying a balance.
Most credit card issuers report account balances to the credit bureaus on the statement closing date, which may be why your bank told you that it was reported delinquent. Typically, late payment information isn’t reported until between 30 and 60 days after the payment due date. So, if the payment was due on the 21st or the 31stit may have been late, but it also may have not yet been reported to the bureaus.
In credit scoring, the higher you go, the harder you fall
Once you are reported as late, as counterintuitive as it may seem, having an A-plus rating can work against you. Unfortunately, this may be one of those times. As the old adage says, “The higher you go the harder you fall.”
Making one small mistake can have what seems to be an almost punitive outcome. According to an Equifax blog, “One late payment could have a more significant impact on higher credit scores. According to FICO data, a 30-day delinquency could cause as much as a 90- to 110-point drop on a FICO score of 780 for a consumer who has never missed a payment on any credit account.”
Why? Because your late payment has cast new doubt on your reliability, possibly indicating that your situation has changed for the worse and so your score needs to reflect that new risk with a lower score. Ouch!
Consider a no-annual-fee card
I’m not sure why your bank told you it might not show up on your credit reports. My guess is the person you were speaking to was not well informed and was guessing themselves. This gives me more hope that if you follow the advice I gave at the beginning of this article you may have a good result.
If you get tagged with a late payment entry on your credit report, it should only take a few months before you see your score return to its previous excellent rating. The late payment will show on your report for seven years but will not count for much given your long and excellent credit history. Just be sure to pay all your bills on time, each and every time going forward.
The other thing I will say about cards that charge an annual or monthly fee is you need to be sure the card is worth the cost of the fee. There are lots of no-annual-fee cards out there that may work just as well for you. The only exception to this in my mind is if the card is your oldest. Even then, if the cost is too high, begin thinking of the best way to transition to a new one that won’t cost you.
Remember to keep track of your score!