March 14, 2019
A recent survey reports that an estimated 40 million Americans expect to make a mess of their financial life this year by missing a credit card payment.
Do that and you are setting off a cascade of problems. There’s the late fee that may cost $35, or more. And if you’re 60 days late, your credit card can slap an interest rate of up to 30% on your entire balance. And then there’s the damage to your FICO credit score, as on-time payments are the single largest factor in calculating your score.
If you think you may miss a payment sometime this year, then right now is the time to hatch a plan so you don’t make this costly mistake.
Keep Track of the Minimum Amount Due. I find it hard to believe that you can’t pay the minimum amount due on each card, on time, every month. Manage to do that and you will avoid a late charge, your interest rate won’t be raised to the sky, and you’re not sabotaging your FICO credit score.
I want to be clear: paying the minimum due is the bare minimum. You really want to be able to pay even more. Which brings me to…
Cut Your ‘Wants’ Spending to Zero. Yes, you heard me. Zero. Pull out your last three statements and circle every charge that wasn’t an absolute necessity. Those are the purchases you are going to stop making. All that unspent money becomes more cash you have to put toward your credit card bills.
Please have an open mind about this. I know it sounds hard. But I also know that if you give it a try I think you will feel an amazing shift in your feelings. There is such pleasure when you are making decisions that allow you to live within your means. Focus on this as something that you are doing for yourself, rather than “doing without.” I think you will love how that makes you feel.
Ask for a Break if You Trip Up. If you do run into trouble and are late with a payment, pay the minimum due ASAP. Then call up the issuer and ask for the late fee to be waived. Surveys have shown that the majority of people who ask for a break, get it. But you have to ask!