What Happens When You Miss a Credit Card Payment?

Canada’s cost of living has risen steadily over the last few years, and wages haven’t always kept pace. As a result many Canadians are relying on credit to get by.

People are carrying higher credit card balances and credit card delinquencies have increased, according to recent analysis from Equifax Canada.

A delinquency occurs when a credit card payment is overdue by 30 days or more. Missed payments can impact your credit score and make it more challenging to stay on top of your debt.

Understanding how a missed payment will affect your finances can help you make strategic choices about how to manage debt when money is tight.

Consequences of a missed or late payment

To better understand the real-life repercussions of missed payments, we took a look at the posted experiences of Canadians on Reddit.

Your credit score will drop

Payment history plays a significant role in your credit score, so late or missed payments on any type of debt will often result in a lower score.

In r/PersonalFinanceCanada, a Redditor with the handle Odd_Call_8983, said their score dropped by 70 points after they accidentally missed a payment. Another Reddit user said they experienced a staggering 100-point decrease after forgetting to make a payment on a retail credit card.

It only takes one mistake to affect your score, but the effects linger much longer.

A Redditor with the username hattokatto12 posted that their credit score took months to recover from a 100-point decrease, after forgetting to make a payment.

🤓 Nerdy Tip: Late or missed payments can stay on your credit report for up to seven years, though “they generally have less influence on your credit scores as time passes, especially if it’s a one-time mistake,” according to Equifax Canada.

Your interest rate might shoot up

Creditors may increase annual interest rates for borrowers who miss their payments. This makes carrying a credit card balance more costly and means it’s harder to catch up on overdue payments.

This was the experience of a Redditor with the handle International-Door90, who lamented that after being a week late on credit card payments twice over the past year, the bank increased interest rates on their account.

Your installment plan may be cancelled

Failing to pay your bill on time can void any repayment installment plans you’ve arranged with your creditor.

One Redditor was frustrated when they found this had happened after just two non-consecutive late payments to their account.

Remember that missing a payment means you’ll likely need to re-negotiate any payment plans you had in place.

And these aren’t the only negative consequences of missing a credit card payment. Some issuers charge late fees for missed payments, which could make it harder to get caught up when funds are already tight. In severe cases, the creditor may even close your account.

How to recover from a missed credit card payment

If you do miss a payment, don’t panic — it happens. These tactics can help you course-correct your finances:

Stop spending on the card. Consumer Protection BC recommends that you stop accumulating debt so you can focus on catching up on payments. This will reduce your monthly interest and help you bring the balance (and your monthly payments) down over time.
Pay the missed amount ASAP. Making up your missed payment will bring your account current, prevent you from incurring additional interest and late fees, and protect your credit score.
Contact your issuer to negotiate payments. If you’re struggling to make even the minimum payment, contact your creditor and ask for assistance. People’s Law School, a British Columbia non-profit dedicated to providing accessible legal advice, recommends making a repayment proposal based on a realistic personal budget.
Consider credit counselling. Dealing with debt can be overwhelming. The Financial Consumer Agency of Canada recommends consulting with a credit counsellor when you need help creating a debt repayment strategy that suits your budget.

How to avoid delinquency

While these won’t make up for times when the money simply isn’t there, these tips may help you avoid missing payments unnecessarily.

Sign up for balance and payment alerts. These alerts will let you know when you’re nearing your credit limit to avoid potential over-limit fees. They’ll also notify you when your account is soon-to-be due, so you don’t forget to pay your bill. Note: One Redditor mentioned that in-app alerts had failed them. For this reason, cover your bases by setting backup alerts in your calendar app, or writing due dates on your paper calendar.
Avoid holding too many credit cards. Multiple cards with different payment due dates can become tough to manage. Many Redditors mentioned missing payments on cards they rarely use, including retail cards. In some cases, they were charged annual fees on cards they didn’t use and had their accounts go delinquent because they were unaware of such charges. Consider closing accounts for unused credit cards to streamline your monthly obligations.
Automate your payments. Setting up auto payments is a simple way to ensure you always pay the minimum amount due on time. You can always increase the amount or make additional payments to lower your credit balance even more.