Whether you’re a college student, a businessman or woman, a soccer mom, yard guy or multi-millionaire, everyone likes to save money… but be careful!
A lot of people wait until the very last minute to pay their monthly bills. While this strategy has a small upside, it has a very big downside! Most installment (car, bank, mortgage) loans have a “grace period”, so making a payment a few days past the due date won’t hurt you, but credit cards typically do not!
If your VISA or MasterCard is due on the 5th and you make your payment on the 6th or 7th, it’s late! While credit card companies won’t report you to the credit bureaus (Equifax, Experian and/or TransUnion until you’re 30 days, they will charge a “late fee” which can cost you $25, $35 or more; that wipes out the .03₵ you saved by holding on to your payment until the last minute!
In addition, your payment history is 35% of your FICO Score making, which makes it the single most important factor in your credit rating. Late payments can/will adversely affect your chances of increasing your credit limit. In fact, some companies will drop your limit and penalize you by raising the interest rate on your account when a payment is late.
If you somehow miss your due date, communicate with the credit card company. Point out this is your first time and ask them to please refund the late payment, and let the bank issuing your VISA, MasterCard, or whatever credit card it won’t happen again.
Oftentimes a sympathetic operator will refund your late fee. You might ask to move your due date to a different day if you have a large number of bills due around the same time each month.
Lastly, don’t let the above stop you from using your credit cards. Credit cards should be used on a regular basis (every few months at the very least). Ideally you have high limits and low balances. Credit card utilization is 30% of your FICO Score making, making it the second most important factor in your credit rating.
By using credit cards on a regular basis, you make certain banks and department stores don’t close your account or lower your limit, both of which will harm your credit rating and lower your FICO Scores much more than a single late payment!