Interest rates may go up
Some lenders include language in the contract that allows them raise your interest rates if a late payment is made. Some lenders may forgive one – or even a few – late payments, but frequent late payments can result in an increased interest. Higher interest means you pay more over the life of the account or loan. Some credit card companies will raise your interest or alter finance terms even if you miss a single payment.
Credit scores drop
Some lenders offer a short grace period of seven to 15 days. After that, they may report your account to credit bureaus as late. Usually lenders report late payments and those that are 30, 60, and 90 days past due. Late payments hurt your credit score and can impact your chances to obtain financing in the future. Late payments on your credit report may also reduce your chance for getting a good interest rate on future loans or accounts.
Internal collectors can be aggressive
Even if you pay your bills before accounts go to collections, if you make a late payment, you might have to deal with an internal collector. They can be as aggressive as collection agencies, calling you several times a day and pressuring you for payment. Sometimes, individuals make payments just to appease such collectors, but that can lead to running behind with other bills and starting the cycle over. Budgeting to pay all your bills on time prevents this from happening.
Loss of account benefits
Some accounts come with benefits, such as interest-free initial periods, cash-back bonuses, or rebates. Some creditors remove benefits from accounts when payments are late, which means you might lose access to valuable services or rewards.