How to deal with delinquent credit card accounts – Forbes Advisor

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There are a number of reasons why you can end up with an overdue account. Maybe you’ve closed a bank account that’s set up for automatic card payment, your partner made a purchase with a rarely used card, or you just missed an invoice in the mail. Beyond the mistakes that arise, you can also find yourself facing a financial challenge due to job loss or illness. Whether you are unable to make your minimum payments or simply forgot, an overdue credit card account can lead to unwanted problems.

When is my account considered overdue?

If your payment is due on the 25th of the month, your credit card payment is technically considered late on the 26th of that month. Late payments are reported to credit bureaus with a “current” code, indicating that the payment is 1 to 29 days late. Once your account is over 30 days past due, it is considered overdue and will be reported to the credit bureaus as such.

be proactive

Whatever the reason your payment is late, your first step is always the same. Pick up the phone and call your credit card provider. Defaults and late fees can make the process overwhelming, but opening the line of communication early can increase your available options.

Let your credit provider know what happened. If you just missed the bill in the chaos of life, let them know you’re ready to pay right away. If you can argue that you are always on time with your payments, you can request that your late fees or additional interest be waived.

If there are extenuating circumstances for your missed payment, explain them calmly. If you’ve lost your job, are experiencing medical problems, or have a family death, many credit providers offer a hardship program. These programs are not widely advertised, so the best way to find out about your options is to communicate your situation to the customer service representative.

Check all transactions

Even if you are careful, fraudulent purchases do happen. Before committing to a payment plan, make sure you’ve made all card purchases. If you find a fraudulent purchase, be sure to dispute this charge with your card provider before discussing payment options.

It’s a good idea to regularly keep an eye on your statement for unknown purchases, but if an account has become overdue, it may not be on your radar. Make sure you look at all the fees and make sure you are responsible for them.

Make a plan

Do the math

It’s worth taking the time to review your budget and figure out exactly what you can afford. If you can’t make the minimum credit card payment, be realistic about what you can afford each month. Don’t over-promise how much or how often you can make payments.

You can also consider alternatives to increase your cash flow. Do you have any new items that you could return to the store for a refund? Could you earn extra hours at work or take a side gig? Could you cut expenses for a season? Are there any items you could sell?

Remember not to rely on this potential income until you know it is guaranteed.

Negotiate your payments

Discuss your payment options. Your card provider is encouraged to work with you because they don’t want to have to debit your account. You want to prevent this debt from going to collections and they want to recoup their lost investment. Depending on your situation, the call representative with whom you initially speak may be authorized to assist you. If not, you may need to speak to another department.

  • Ask if you qualify for a hardship program.
  • Let them know how much you are able to afford.
  • If your situation is temporary, indicate when you think you can make regular payments.

Get it in writing

If your credit card provider accepts a payment plan, get it in writing. Ask them to include wording that says if you join the payment plan, your account will be reported to the credit bureaus as up to date. Review the written plan once you receive it and make sure it matches your understanding of the agreement.

Keep diligent records

Keep a copy of the payment agreement. Be sure to keep a log of all calls to your creditor, including the date, time, and a brief recap of the contents of the call. You should also record all payments made on your debt. These records will help you in your future communications with your creditor.

Reduce purchases of additional cards

When money is tight, sometimes credit cards are your best form of emergency payment. However, make sure you don’t increase your debt on other cards in order to cover the overdue payment for a card. It is best to have only one creditor reporting the delinquency, if possible.

If you find yourself with multiple delinquent accounts at once, be sure to contact all of your creditors. Explore your payment options and look for ways to reduce if possible. If you’ve slashed your budget and are still having trouble, contact a HUD Approved Credit Counselor. They can help you better assess your options and determine if debt settlement is necessary.

Know the consequences of delinquency

Loss of your reward points

Most credit cards state that you will not earn rewards and that points cannot be redeemed if your account is not in good standing. In some cases, especially if your account is closed, you risk losing your points entirely.

For this reason, if you expect to be unable to make a payment, consider redeeming the cash back credits as statement credit before you miss a payment.

Late fee

Many credit cards charge late fees. Additionally, if you are more than 60 days late, you may find that your account is charged a higher interest rate, known as the penalty APR.

Reduced credit score

Your creditor will report your delinquent account to the credit reporting agencies. This negative data will lead to a reduction in your credit score. Negative activity, like an overdue account, can stay on your credit report for 7 years. If you had excellent credit, it’s likely that an overdue account could have a more negative impact on your credit than if you had poorer credit with a previous late payment recorded.

Rebuild Your Credit Score After Delinquency

While there is nothing you can do to remove this blemish, there are simple steps you can take to increase your score in other areas.

Pay on time

Making your minimum payment on time each month is the best thing you can do to rebuild your credit. Timely payments represent 35% of your FICO credit score. And even if this delinquency will remain on your record, every month you have a timely payment, its impact will be reduced.

Pay off your debt

The second biggest impact on your credit score is your debt to available credit ratio, also known as percentage of use. You can increase your credit score by paying off your credit card balances. When possible, charge less or make more than the minimum payment.

Keep your old credit cards active

After credit problems people are tempted to overcorrect. If you plan to close accounts so you don’t run into debt in the future, consider keeping your oldest credit account open. Although the length of your credit history is only 15% of your score, keeping your oldest credit account active will ensure that your credit score does not drop even further.

How to Avoid Overdue Accounts

Once you’ve resolved your overdue accounts, you want to ensure timely payments in the future.

  • Avoid carrying a scale when possible.
  • Set up automatic payments every month, especially for cards you rarely use.
  • Update your contact information and mailing information to receive card notifications in a timely manner.
  • Set up an emergency account for bill payments and unexpected costs.
  • Call your card provider before you miss your next payment.

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Final result

Start a conversation with your creditor as soon as you know there is a problem. Be honest and ask what can be done to keep your account up to date. Get all agreements in writing and stick to them. While this process can be tedious and require a squeeze on your spending, adopting a payment plan can help get your card back in good standing.


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