Consequences of paying late on credit cards

Credit card providers dislike borrowers paying late.  This is only partly because of the extra administrative costs that these accounts incur, but also because it is an early indicator that there will be problems later.

Penalty fees are only one of the consequences of late payment.  Penalty fees are now heavily regulated by the Reserve Bank of Australia so that banks are only covering their costs.

A bad credit report is another way in which the borrower suffers from late payment.  Credit card providers report late payers to the credit bureaus, and this can adversely affect their credit ratings.

It is likely that credit limits on the credit cards will be lowered.  If the old balance is above the new credit limit (which is very likely if the card has a large amount of money on it) then the card will not be able to be used until the excess is paid off.

There are a number of ways of avoiding the late payment penalty.  The best way is to allow the credit card provider to take off the minimum payment by direct debit.  This will mean that the amount can be paid off whether the card holder is on holiday or did not receive their post.  It is a very good idea for a person who is naturally forgetful.

If direct debit is not available then the best way to avoid late penalty fees is to send off the credit card payment as soon as the statement is received.   This can sometimes be impractical.

Electronic statements are a way of getting the statement as soon as it is issued.  The electronic statement usually is on a website but is alerted by email.  There should be facilities to pay off the amount on the screen.  This facility is not currently offered by all credit card providers and may be something to look for as a credit card feature.

Grace periods are another credit card feature to look for when choosing a credit card.  This is a period before which interest and late payment fees are charged.  This can vary dramatically among credit card providers and should be considered before taking out debt.

Late payments are a good argument for consolidating credit card debt.  This means either taking out a personal loan or transferring the credit card debt on to a couple of cards so that it is easier to keep track of the payments due.