Missing a credit card payment

Missing a credit card payment sets off a chain of consequences that starts small and can grow serious. In the first weeks it means reminders, a late payment charge and extra interest. If the arrears continue, the missed payments are recorded on your credit file, the lender may issue a default notice, and eventually the debt can be passed to a collection agency or end in court action. None of this happens after a single slip that you quickly put right, but the further behind you fall, the fewer options you keep.

A missed payment means you entirely fail to pay a bill¹. Your credit card company should contact you if you miss a payment and will probably make an extra charge². If you don't pay your credit card bill, the company will add on interest each month, and extra charges are added if you miss payments³. You cannot go to prison for simply not paying a credit card debt, but the debt can be pursued through the courts: county court judgments (CCJs) in England and Wales, decrees in Scotland, and civil bills in Northern Ireland⁵.

The single most useful thing to know is that the early stages are recoverable. If you catch up after one or two missed payments, no further action should be taken and the missed payments may not be recorded on your credit file at all⁶. Acting quickly, and getting free debt advice before the situation escalates, protects both your credit record and your options.

What happens when you miss a credit card payment

The first thing that happens after a missed payment is contact from your lender. Your credit card company should get in touch and will probably add an extra charge to your account². At this stage the situation is still between you and the lender: no court is involved, nothing has been recorded against you permanently, and the missed payment may not reach your credit file if you catch up quickly⁶.

What makes a missed payment expensive is the way interest compounds on the growing balance. If you don't pay your credit card bill, the company adds interest each month, and more interest is added as the balance gets bigger³. StepChange gives a plain illustration of how this works: if you owe £1,000 at an interest rate of 20%, you could also owe £200 in interest after a year⁵. The missed payment itself is a one-off event, but the interest it triggers keeps running until the balance is cleared.

The stages that follow depend on how many payments you miss. After one or two missed payments, reminders are sent and interest and charges are added⁶. If you miss three to six payments, the credit card company may send you a default notice, which is the formal step that precedes a default being recorded and the debt being handled as in arrears². A default notice is used for debts covered by the Consumer Credit Act, which includes credit cards⁶.

If you are already struggling, the practical first moves are to stop using the card, so the amount you owe stops growing, and to contact the lender before the next payment is due rather than after³. Lenders are expected to work with customers in difficulty, and the earlier you make contact, the more room there is to agree an arrangement.

Late fees and extra interest on a missed payment

Two costs land on your account when you miss a payment: a late payment charge and extra interest. On the charge, there is a benchmark worth knowing: charges of more than £12 for missing a credit card repayment may be seen as unfair⁷. That does not cap the fee by law, but it is the reference point used when a charge is challenged, and if you are charged more, a complaint may succeed.

The interest side is where the real cost sits, and it works in a way many people don't expect. If you don't pay off the full amount every month on a credit card, you'll be charged interest on the whole lot, not just the unpaid amount¹¹. Worse, if you don't repay in full, interest on your shopping is usually backdated to the date of purchase⁹. So a single missed payment can strip away the interest-free period you had been relying on, and interest can be charged on the amount outstanding¹². Most credit cards offer an interest-free period on what you've bought only if you pay off your bill in full⁹.

The rules require lenders to be upfront about all of this. Under the FCA's consumer credit rules, the key information given before you take out a card must set out the circumstances in which charges for late or missed payment or underpayment will be applied, the amount of those charges, and the risk to your credit rating¹³. If a charge appears that was never disclosed, that is a basis for a complaint.

Missing a deadline once arrears have already started can add fees or push enforcement to the next stage¹⁴. And if you are using a consolidation loan to clear card debt, the same mechanics apply to that loan too: late payment fees could be added to the amount you owe and interest added will only increase what you owe¹⁵. The guide to how credit card interest is charged explains the calculation in more detail, and late payment and over-limit charges covers what lenders are allowed to charge.

How a missed payment shows on your credit report

Missed payments are recorded on your credit file, and they stay there for six years¹. Which? notes that late payments stay on your credit history for six years, as do missed payments and defaults, and that a missed payment will show on your report for six years, although its impact will lessen as it ages¹. Lenders assessing an application will see a small number next to each late payment showing how many months late it was¹.

The effect on your ability to borrow can be significant. One late payment on a credit card or loan can dent your Experian score by as much as 130 points¹⁷. Missed payments on your credit file can make it harder to get credit in future and harder to remortgage¹⁸. A credit file holds personal details, what you owe, defaults, court action, home repossession, debts secured against an old address and insolvencies, and missed payments, defaults and court judgments are among the information that stays on file for six years¹⁶.

There are two situations where the rules work differently from people expect:

• Joint debts. Missed payments are marked on both credit files, regardless of who actually missed the payment¹⁹. This applies even after a relationship ends: if a payment is missed on a debt in joint names, it is recorded on your credit file as well as your ex-partner's, even if the ex-partner agreed to repay the debt²⁰. Missed payments on credit debts that are solely in your ex-partner's name do not show on your credit file²⁰.
• Agreed payment holidays. A payment holiday is not marked as a missed payment on your credit file²¹. However, you still have to pay the full amount and any interest added during the break²¹.

Where a holiday was not properly agreed, the consequences can be severe. In one Financial Ombudsman case study, a borrower found two missed payments marked on his credit file after a repayment holiday, and the ombudsman's involvement was needed to put it right²². If you agree any break or reduced payment with your lender, get it confirmed in writing.

A missed payment cannot simply be removed by asking. Some lenders may remove a single historic late payment remark if you agree to sign up for automatic payments, such as a direct debit¹. Beyond that, the mark remains until it drops off after six years. The page on how credit cards affect your credit file covers the wider picture.

Paying at least the minimum stops things getting worse

If you cannot pay the full balance, paying at least the minimum each month is what keeps the account out of arrears. Make minimum payments to avoid breaching the terms of your agreement²³. A missed minimum payment is what counts as a missed payment for the purposes of default notices and credit file markers, so even a token payment that meets the minimum keeps you inside the terms of the deal.

The minimum payment has a well-known weakness, and the regulator recognises it. Minimum payments usually only cover the interest and charges on a debt⁴, which means the balance itself barely falls. Your credit card company should contact you to warn you of what might happen if you only make minimum payments⁷, and there are specific rules, covered in persistent credit card debt rules, that require lenders to intervene when a customer is paying more in interest, fees and charges than they are repaying of the balance over a sustained period.

So the minimum payment is a holding action, not a solution:

• It protects you from late fees, default notices and credit file markers²³.
• It does little to reduce the balance, because it usually only covers interest and charges⁴.
• If you cannot pay in full, making sure you make the minimum payments is the advice for anyone managing a card while rebuilding their credit²⁴.
• Setting up a direct debit for the minimum removes the risk of forgetting, and some lenders may remove a single historic late payment remark if you agree to automatic payments¹.

The ombudsman's own approach illustrates how minimum payments function in practice: when calculating redress, it assumes a consumer who consistently made minimum payments might have paid the slightly smaller minimum rather than the amount they actually paid²⁵. In other words, the minimum is treated as the floor of what a customer in difficulty pays. The pages on credit card minimum payments and how long paying only the minimum takes set out the numbers, and paying your credit card bill covers the practical ways to pay.

From missed payment to default and debt collection

Arrears on a credit card tend to escalate in recognisable stages. After one or two missed payments, the creditor sends reminders, and if you catch up, no further action should be taken⁶. Once you have missed three or four payments, the missed payments are recorded on your credit file and the creditor will soon think about sending a default notice, since credit cards are debts covered by the Consumer Credit Act⁶. A credit card company may send a default notice if you miss three to six payments², and a default is generally recorded once you have missed three or more payments⁸.

After a default, the debt moves into the normal collections process. The creditor may take further action to collect the debt, possibly using a debt collection agency or applying for a county court judgment²⁸. Defaults stay on your credit file for six years from the date they are recorded¹⁶. Debt collection itself is a regulated activity with rules the agency must follow, covered in the site's guide to help with credit card debt.

Two things are worth knowing at this stage. First, a default is not the end of the road: the debt can still be repaid, arranged or resolved, and the marker ages off after six years. Second, if the creditor starts court proceedings and the case is settled by a Tomlin order, an agreement that pauses proceedings while you keep to a payment schedule, missing payments under that order restarts the proceedings and you get a CCJ²⁹. The lesson repeats at every stage: an agreement you keep is worth far more than a bigger promise you break.

Court action: CCJs, decrees and civil bills

Court action is the last resort for a credit card lender, not the first. Before a creditor can take you to court to get a CCJ, they should send you a letter before action or a default notice, depending on the type of creditor³⁰. A County Court Judgment is issued only if you fail to pay money that you owe and most other reasonable avenues to recover the money, letters, defaults and late payment notices, have been ignored and exhausted³¹. CCJs are often used as a way of recovering non-priority debts, such as credit card debts and payday loans³⁰.

The court document has a different name depending on where you live: CCJs in England and Wales, decrees in Scotland, and civil bills in Northern Ireland⁵. The consequences are similar in each nation. Not paying non-priority debts can result in the debt being passed to a debt collection agency and a county court judgment being made against you, which affects your credit rating³². Court action, including CCJs, decrees and money judgements, is recorded on your credit file¹⁶.

There are time limits and escape routes worth knowing:

• If you pay the debt relating to the CCJ within 30 days, or successfully dispute it, it might not appear on your credit history at all³¹.
• The CCJ will be visible on the public register and your credit file if it is not paid in full within a month of the judgment²⁹.
• If your CCJ was longer than six years ago it will not appear on your credit file³¹.

If a judgment is made and you then miss the payments the court ordered, enforcement can follow, and in rare situations the court can take further action if you do not follow their instructions, though you cannot be sent to prison for not paying the debt itself²⁸. The narrow page on unpaid card debt and court action covers the process in detail, and there are separate guides for credit card debt in Scotland and Northern Ireland.

Credit card debt is a non-priority debt

Debt advisers sort debts into priority and non-priority, and the category decides what you deal with first when money is short. Credit card debts are non-priority debts³³. Non-priority debts include credit card debts, some hire purchase agreements, unsecured bank and payday loans, water bills, and loans from friends and family³². The reason for the label is the consequence of non-payment: a payday loan, for example, is a non-priority debt because you cannot lose your home, lose an essential service or go to prison for non-payment³⁴, and the same logic applies to credit cards, since you cannot go to prison for simply not paying a credit card debt⁵.

This does not mean the debt does not matter. Credit card debts are known as non-priority debts, but that doesn't mean they are not important². It means that if you can only pay some of your bills this month, rent or mortgage, council tax and energy come first, because the consequences of missing those are losing your home, facing court fines or having the supply cut off. Credit card arrears bring charges, credit file damage and eventual court action, but not the loss of your home or liberty.

One change of status matters. Non-priority debts become priority debts if the creditor is granted a County Court judgment against you³⁵, because at that point ignoring the debt means ignoring a court order. This is a strong reason to engage with the lender, or with a free debt adviser who can help you draw up a budget and financial statement³⁵, before a claim is ever issued.

Options if you can't catch up

If you cannot bring the account back up to date, there are several routes, and the right one depends on your income, your other debts and how much you could realistically pay each month. All of them work better before a default is recorded than after.

• Stop spending on the card. The first thing to do is stop using the credit card you want to pay off, so the amount you owe stops growing and becomes quicker to repay⁴.
• Talk to the lender. If you think you might miss a payment, contact the lender as quickly as possible and discuss your options³¹. Lenders can agree reduced payments, payment plans or forbearance, and your rights when you cannot afford higher repayments are covered in a dedicated guide.
• A payment holiday. You may be able to get a credit card payment holiday even if you are already behind on payments, but you still have to pay the full amount and any interest added during the break²¹. A payment holiday is not marked as a missed payment on your credit file²¹.
• A balance transfer. Moving the debt to a card with a better deal, such as a lower interest rate, is one alternative to relying on your existing card²¹. How the fees work is covered in the guide to balance transfer credit cards and balance transfer fees, and missing a payment on a 0% deal can lose you the promotional rate, as explained in its own guide.
• A debt consolidation loan. This may be cheaper than relying on your credit card²¹, but it carries its own risks: late payment fees could be added to the amount you owe, interest added will only increase the amount you owe, and you could receive a default notice on your credit file with possible CCJs to follow¹⁵. The comparison of credit cards and personal loans sets the two side by side.
• A debt management plan. A free debt adviser can set out a budget and negotiate reduced payments across your non-priority debts, using a financial statement of your income and expenditure³⁵.

Whichever route you take, the common thread is that interest and charges keep accruing on anything unpaid, so the total cost of the debt rises the longer it takes to resolve⁴.

Where a missed payment leads to IVAs, DROs and bankruptcy

For some people, no repayment plan is realistic, and formal insolvency solutions become the way to deal with credit card debt. These are legal arrangements with serious consequences, and free advice is essential before choosing one, but they exist precisely so that unpayable debt has an endpoint.

• Bankruptcy writes off unsecured debts but with significant consequences for your assets and credit file.
• A debt relief order (DRO) is available if you are unable to pay your debts³⁶. You cannot get one if you are already bankrupt, are in an individual voluntary arrangement or subject to an interim order, are subject to a bankruptcy restrictions order or undertaking or a debt relief restrictions order or undertaking, or have a bankruptcy petition pending unless referred by a court³⁷. Some debts cannot be included in a DRO, such as magistrates' court fines, maintenance and child support payments and arrears, student loans, budgeting loans and crisis loans³⁷, and you remain liable for debts such as court fines, child support and student loans³⁶.
• An individual voluntary arrangement (IVA) is a binding agreement with your creditors. It carries its own risk of failure: many IVA proposals state that three missed payments in any twelve month period is an automatic fail³⁸. If your creditors don't agree that your reasons for missed payments are valid, the IVA will fail, the insolvency practitioner may initiate bankruptcy proceedings, you may be liable for fees paid by your creditors up to that point, and your creditors will once again be entitled to pursue you for the outstanding debt³⁸.

A write-off is also possible without formal insolvency. A write-off is when a creditor has agreed to no longer pursue you for an outstanding debt³⁹, and your debt would be cleared immediately if a creditor agreed to one⁴⁰. You can make a request for a debt write-off to any creditor except in the case of student loans, court fines, maintenance arrears, child support arrears, debts built up through fraud, debts arising from a personal injury claim or crisis loans⁴⁰. Credit debts such as loans or credit cards should be written off if the debt is only in the deceased person's name and they had no assets when they died³⁹.

The debt section of the site covers all of these solutions in full, and the alternatives to bankruptcy, including DROs, are explained in the guide to options for dealing with debt.

Free debt advice and where to get help

Every piece of advice on this page points to the same practical step: get free, independent debt advice early. You do not have to pay for it, and you do not have to wait until the debt is in default. Advisers can help you draw up a budget, prioritise your debts, negotiate with lenders and check whether you qualify for a formal solution.

Free help is available from several well-known sources. The FSCS's debt support page directs people having trouble repaying money they owe to free debt advice from resources including StepChange, Which? and Citizens Advice⁴¹. In Scotland, mygov.scot signposts free, confidential and independent debt advice from National Debtline²⁶. Business Debtline and National Debtline guides are also cited throughout this page because they set out the same rules for individuals across the UK¹⁴.

If something has already gone wrong with how your account was handled, a late fee you think is unfair, a payment holiday wrongly marked as a missed payment, a charge that was never disclosed, there is a formal complaints route. Complain to the lender first, and if it does not put things right within eight weeks or you reject its response, the Financial Ombudsman Service can look at the case. Where the ombudsman upholds a complaint, it can tell the firm to put things right, and the interest rate for late payment of its final decisions is usually 8% simple a year²⁷. The guide to complaining about a credit card provider walks through the process.