Why you should always make the minimum payment on time on a credit card with a promotional financing offer

by Jason Steele on February 6, 2013

Credit cards with interest free promotional financing can be incredibly attractive. New applicants are promised 0% APR financing on new purchases, balance transfers or both. And while these terms mean that cardholders can take a break from paying interest, it is vitally important that they continue to make their minimum payments on time.

What happens when a cardholder makes a late payment

When a cardholder fails to make a payment on time, there are several very negative consequences. First, the cardholder will be assessed a late payment fee in accordance with the credit card’s terms and conditions. These fees are often around $35 or the amount of the payment, whichever is less.

But more importantly, the cardholder’s balance may now be subject to the penalty interest rate. This means that a 0% APR credit card can turn into a high rate card that incurs interest at rates as high as 30% APR or more.

Simply put, this is devastating to a cardholder that had not been accruing interest at all. But worse, the card issuer will report the delinquency to the credit bureaus, hurting the cardholder’s credit score.

How to avoid making a late payment

The easiest way to avoid making late payments is to set up electronic payment from a bank. The payment should be at least the minimum balance, and it should be scheduled to be received before the due date. Receiving a statement in the mail and sending payment through the post office is the least reliable way to transmit funds.

What to do if a payment is received late

Cardholders who accidentally make late payments should immediately contact their bank and request to have interest and late fees waived. Most banks will do this for cardholders who have a good payment record. Banks spend a tremendous amount of money trying to attract retain new customers, and they will bend over backwards to retain the ones they already have. Therefore, banks would rather waive some fees and penalties if there is a possibility of retaining a customer over the long term.

By understanding the consequences of late payment, cardholders can take every necessary step to assure that their payments are received on-time. Interest free promotional financing offers are just too valuable to forfeit due to careless management.

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