What Happens If You Miss a Credit Card Payment in Canada?

Missing a credit card payment, or paying less than the minimum, has costs that build the longer it goes on: interest and fees straight away, a possible rate increase, and once the payment is reported late, damage to your credit report that lasts for years. This page covers what happens at each stage and what can be done about it. Payments and their costs are covered across our credit card basics guides.

What a missed payment risks

The Financial Consumer Agency of Canada (FCAC) lists the risks of not paying at least the minimum, or paying late: “your interest rate increasing negatively affecting your credit score losing the benefit of any promotional rate offer you have your financial institution cancelling your credit card.”

Interest

Card issuers give an interest-free grace period to pay for the previous month's purchases, beginning on the last day of the billing period, and federally regulated financial institutions must provide at least 21 days. It doesn't apply to cash advances, cash-like transactions and balance transfers, and interest applies if the balance isn't paid in full by the due date. When the statement balance isn’t paid in full by the due date, FCAC says “you’ll pay interest from the date you made the purchase.” How credit card interest works explains the daily calculation. On many cards, new purchases also lose their interest-free period until the balance is paid in full again.

Fees

Many cards charge a late payment fee; the amount and any rules about it are in the cardholder agreement. If the payment was attempted by pre-authorized debit and bounced, the issuer’s dishonoured payment fee and your bank’s NSF fee can apply as well. Credit card fees lists the other charges a card can add.

A higher interest rate

Missing the minimum can also raise the card’s interest rate, temporarily or for good, and end a promotional rate; the size of any increase is set out in your agreement. How credit card interest works covers rate increases and the notice an issuer must give.

Your credit report

Late payments are reported by the issuer to the credit bureaus, and a payment reported late is one of the most damaging items a report can show. FCAC says information about late or unpaid credit cards and loans stays on your report for up to 6 years. Issuers generally report a payment as late once it’s a full billing cycle (30 days) past due, and the rating worsens with each further missed payment. If the account keeps going unpaid, the issuer can close it, write it off and send it to a collection agency, which is reported too.

How a late payment shows up, as an R2, R3 and so on, is explained in how to read your credit report. How it affects your score, and how long recovery takes, is covered in why did my credit score drop.

If you’ve already missed a payment

1. Pay at least the minimum as soon as possible. A payment made before it’s reported late limits the damage to interest and any fee.
2. Call the issuer. Some issuers will reverse a first late fee or discuss a payment arrangement when asked; FCAC’s advice is to “contact the lender right away if you think you’ll have trouble paying a bill.”
3. Keep the account open. Closing it doesn’t remove the late payment, and closing a credit card reduces your available credit, which raises your credit utilization.
4. Check your credit report a month or two later to see how the payment was reported. A payment reported late in error can be disputed with the bureau; how to dispute a credit report error covers the steps.

If missed payments are a sign that the balance has grown beyond what you can pay, how to get out of credit card debt sets out the options, from a repayment plan to credit counselling.

Avoiding a missed payment

• Automatic payments for at least the minimum, set up from your bank account, cover the due date even when you forget. FCAC notes your issuer may also send electronic alerts when a payment is due.
• Paying a few days early. FCAC explains that “The payment method you choose can affect how quickly the issuer processes it and the date they consider it paid,” and that a payment due on a weekend or holiday can be made the following business day.
• Moving the due date to fit your pay schedule, which many issuers allow on request.

How the minimum itself is calculated, and why paying only the minimum costs so much, is in credit card minimum payments.