Avoid late fees and dings to your credit with these easy tricks
Despite low unemployment and moderate wage growth in recent years, consumers aren't necessarily getting better at paying their bills on time.
In fact, the Consumer Financial Protection Bureau's (CFPB) 2019 Credit Card Market report states that late credit card payments have actually been increasing. Delinquency rates, or the share of accounts with missed payments that are at least 60 days late, have been steadily rising since 2015.
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Missing even minimum payment on your credit card can result in late fees and a blow to your credit score. If you fail to make a second payment -- in other words, your bill becomes 60 days overdue -- you put both your credit score and your finances at risk. In this case, credit card companies can increase your interest rate to the penalty APR, which is often as high as 29.99%.
No one wants to find themselves short on cash when the credit card bill is due. Here are the best ways to make sure you never miss a credit card payment.
1. Set up automatic payments
The first, and easiest, step is to set up auto-pay on your credit card bill. Nowadays, virtually every credit card issuer allows you to do this.
You'll need to log on to your credit card account -- or set up an online account if you don't already have one. Click on the payment tab where you'd normally make a manual payment, and there should be an option to set up automatic, recurring payments from a checking account.
This is also where you'll be able to choose the size of your automatic payment. You could choose to automatically pay your credit card bill in full every month to help ensure you never pay interest fees. However, be aware that this could also result in you accidentally overdrawing your bank account if your credit card bill is exceptionally high one month. If your bank account gets close to $0 once in a while, set up auto-pay to make the minimum payment a few days before the due date, and then log in to manually pay off the rest before your bill is due.
2. Time your due date after payday
Some credit card issuers will let you customize your credit card bill due date. Get in touch with your credit card company or peruse the payment section of your account online to see if this is possible. If it is, set your payment due date for a few days after payday.
If this isn't an option, the next best thing is to set up an auto-pay for a few days after payday, even if it's weeks before your bill is actually due. That way, you know the minimum payment has already been made, and you can pay off the rest when your statement is due to avoid interest fees.
3. Create account alerts
Most banks will let you set up email, text, and mobile app alerts to notify you of everything from potential fraud to a large deposit in your account to a dangerously low account balance. Set up the last one on your checking account to avoid spending all of your available funds before your credit card bill is due.
Contact your bank to get these alerts set up. There are also a number of budgeting apps that offer the option to connect a bank account, and typically, they'll send you alerts for activities like low balances and large deposits as well.
4. Keep an emergency fund
Forgetting to pay your credit card bill comes with an easy fix nowadays -- just set reminders and automatic payments. Unfortunately, remembering to pay your credit card bill but not having enough money to do so is harder to fix.
Having an emergency fund is the best way to avoid this tough situation. This can act as a cushion in your checking account for those months when you go a little over budget, and it can also help you avoid pulling out your credit card to cover emergency expenses like vet bills and car repairs.
It can be challenging to save money, especially if you're living paycheck to paycheck, but even $25 per month is enough to get into the habit of building your savings. Once you're used to putting aside that much, increase it to $50 per month. You'll want to aim for $1,000 for a starter emergency fund. Then, once you've paid off any credit card debt, you can build up a real emergency fund, which should be about six months of basic living expenses. You can keep this in a free online savings account.
5. Check your bank accounts regularly
If you struggle to stick with a budget or find your credit card balance is often higher than expected, checking your bank accounts more frequently can help. This includes monitoring your checking account regularly and checking your credit card account balance often. Not only will this help you stay on top of your spending and avoid coming up short on cash, it'll also help you avoid fraud and catch hidden banking fees.
Make it easy on yourself by keeping your bank account mobile apps on the home screen of your phone or setting your browser homepage to the login pages of your bank accounts. That way you'll have a constant reminder to stay on top of your cash flow.
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