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If you’ve been a CreditShout.com reader for a while, you know that on-time payments make up 35% of your FICO credit score and can have a huge effect on the interest rates you get on credit cards, loans and mortgages, as well as affecting other aspects of your life.
Things come up and people face financial burdens. But most average people who know how to manage their credit well may have an occasional missed credit card payment. What happened? The check got lost in the mail. They lost track of the date. They just forgot.
It happens. The good news is, one missed payment surrounded by a long history of on-time payments won’t do more than make a small ding in your credit score. But why risk even that? There are other ramifications when you miss a payment, too.
For instance, if you’re enjoying a low intro APR, your APR will shoot up to the regular, higher interest rate. If you already have an average APR, you could wind up with a default APR as high as 29.99%. And, while it can be done, it’s not as easy as it used to be to convince credit card companies to lower your interest rate automatically after such an infraction.
You may also get hit with late fees of up to $35, but not more than your minimum payment due. (This was one of the benefits of the Credit CARD Act of 2009.)
Fortunately, with today’s technology and the many programs credit card company’s offer, there’s very little excuse to ever make a late payment. Here are five ways to make sure you never miss a payment in 2011.
When you go online to your credit card online management site, you’ll probably see an option to set email or text reminders up to a week before your bill is due. You can also receive electronic statements. Since you can usually click on a link in these emails and go straight to the website where you pay your bill, this makes it easy to pay your bills on time, every time.
One email reminder not enough? Websites like Mint.com will send you reminder emails before your payments are due.
There are a number of free apps available to help you manage your budget and send reminders of billing due dates for your credit cards. This blogger at Brighthub.com recommends a $1.99 program available for iPhone simply called “Budget.”
Mint.com is available for both iPhone (and iPod Touch/iPad users) and for Android users. Blackberry users are still out of luck, though.
Sometimes, we face financial circumstances where we really can’t afford to make a payment in a certain month. Many major credit cards offer the option to skip a month’s payment without paying a late fee or damaging your credit rating. But the cost is still high. Some companies have fees associated with the program. Even if there are no added fees, you will still accrue interest, so even if you don’t charge anything, you’ll be left with a higher credit card balance than you had the previous month. This should only be used as a last resort to protect your good credit. It’s obviously best to scrape up the money for the minimum payment.
You have to read the fine print on the offer, too. Some credit card companies offer payment holidays for any reason at all. Others require you to show proof of a “major life event” such as a wedding, funeral, or even a big trip. Some require proof of financial hardship, such as emergency car repairs.
Let’s say you remembered to pay your bill — but you’re looking at a minimum payment you just don’t have this month. It pays to call your credit card company and ask if you can negotiate a lower payment for one month. They may be willing to work with you if you have a good record in the past. You should at least try to cover the finance charges for the month in order to keep chipping away, however slowly, at your credit card debt.