Handling your past due credit card may seem like an intimidating task. But there is no doubt about it – you have to work on it. There are money problems that you need to get rid of and this is one of them. It does not matter why you had to make your payments late. You need to make sure that it will not happen again.
When your credit card is past its due, that means you failed to send your payment before the due date. This is sometimes referred to as a default and it usually happens the day after your due date. This will also automatically impose a late penalty charge on your account. If that is not bad enough, this mistake might also result in a negative mark on your credit report. This is why it is important that you do something about the past due credit card account as soon as it happens. The longer it stays that way, the more chances that it can ruin your credit report – and in effect, your credit score.
Being in this situation is actually not uncommon. According to reports, the default rate on credit cards in the US grew by 3.31% after the first trimester of 2017. This is actually a 13% increase from the same period last year and is considered as the highest default rate since June of 2013.
Obviously, you can only remove your credit card from its past due state once you have made your payments current. That means you need to pay what you missed plus the interest and charges associated with your late payments. Unless you do this, the additional charges will just pile up and make your debt significantly grow.
Different options to deal with past due credit card payments
While it is difficult to handle your past due credit card accounts, it is not impossible. You just have to find the motivation and determination to do it. With the interest rate threatening to increase, you should work harder to get your credit card out of this unfortunate predicament. Apparently, a 0.25% rate hike will make you pay an additional $2.50 each year for every $1,000 of debt.
But how can you deal with your past due accounts? Here are some tips that you can follow.
Pay your dues in full.
At least, you need to pay your past due in full. This is the most straightforward way that you can get out of your past due account. Just put it back on track through a lump sum payment. Make sure that you include the late penalty charges and the interest rate that was added to it. While you will definitely be paying more, it will at least keep your account from being charged-off.
Negotiate to pay in installments.
If you are currently in a bad financial situation, you can call your creditor and negotiate with them. Ask them if you can pay in installments. Sometimes, they will agree if this means you will continue paying your credit card debts. However, this installment will only be for a couple of months. Once the creditor agrees, you will be able to catch up on your payments slowly. Just remember that your account will continue to be considered a past due credit card until after you have made your payments current.
Ask them to delete the credit report entry.
This is also a part of the negotiation. Ask the creditor if they are willing to remove the past due entry in your credit report if you can make your payment current. Remember that this is a favor that they will give you. Try not to be too demanding when you ask. In case they do not give in, that is okay. If you continue paying your debts on time, your credit score will soon be repaired.
Opt for debt consolidation.
In case it becomes harder for you to pay off the debt at its current rate, it might be a good idea to consolidate your debts. A debt consolidation loan has a lower interest rate compared to a credit card. If your past due credit card account has not yet damaged your credit score, you might want to apply for a loan. This will help you lower your monthly payment and possibly make debt relief easier. If you know of a 0% balance transfer option, you might want to grab that as well.
Settle your debts.
This is actually another option to consolidate. However, this is best for those who already have a ruined credit score. In this option, you will negotiate with your creditor to allow you to pay only a portion of your balance. While this payment is lower than all your debt, it should still be higher than what you owe as your past due. This lump sum payment will be offered to the creditor with the agreement that anything it cannot cover will be forgiven. That is basically what debt settlement wants to achieve. You will pay pennies for every dollar that you owe. If they agree, you can get rid of the debt entirely.
While bankruptcy is certainly another option for you to deal with your past due credit card debt, it is not really advised. If you can aim for debt settlement, you will be better off. Not only that, it will be easier for you to recover.
Tips to keep your credit card payments from being late
Now that you know how you can handle the consequences of your late credit card payments, it is time to be more proactive about your debts. Make sure that you will never land in the same situation again. To make that possible, here are some tips that you can follow.
Budget your credit card purchases
Start by budgeting your credit card purchases. There are certain categories that should be in your budget plan and your credit purchases should be one of them. You can budget $200 each week to spend on your credit card. If you include it in your budget, it is more likely that you will have the cash to pay off your balance in full when the billing statement comes around.
Set up reminders
Sometimes, past due credit card debts happen because you forgot that you were supposed to pay it already. If you are usually busy and you tend to forget things, you might want to set up reminders. You can set up an email notification a few days before your due date. That way, in case you do not have the money to pay your debts, you have a few days to come up with the funds.
Keep track of your expenses
It is also very important that you monitor where your money is going. If you put your credit card purchases in a budget plan, this will be easier to track. But then again, it is important to get into the habit of planning when and where you will use your credit card.
Pay your bills within the grace period
The grace period is the time between your date of purchase and the due date of the billing statement where that transaction is included. If you pay your balance within this time, you do not have to worry about any interest or finance charge bloating your debt. According to reports, only 35% of credit card users pay their balance in full. The rest carry over their balance to the next billing cycle.
The truth is, making sure that you will never suffer a past due credit card is a never-ending task. Make sure you develop the right habits to avoid getting into a bad financial situation again.