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What Happens if I Can’t Pay My Credit Card Bills? Late Payments & Credit Scores

Many of us rely on credit cards to purchase items and services, with some of us only using credit when absolutely necessary. Nevertheless, despite our attempts to strive for better credit habits, our credit card bills can spin out of control. This article takes a look at the advantages of paying with credit cards, how they can spiral out of control and what happens to your credit score if you’re unable to make payments.

The Benefits of Using Credit Cards

Using credit cards for purchases can have some advantages, including:

  • Rewards – you might use your credit cards to earn points for travel, gifts, gift cards, or cash back.
  • A detailed record of spending-putting all your purchases on your credit card will show you where your money is going, making it easier than searching multiple accounts.
  • A maximum spending limit-using your credit card for spending can cap your spending to the limit on the card.
  • Recourse-in some cases, it can be easier to get a credit card charge reversed rather than trying to reverse a payment that went through your bank account.
  • Warranties and insurance-some credit cards offer benefits like an extended warranty and insurance for goods purchased.
  • Security-using a designated credit card for shopping in-person and online can separate your banking from your purchases.

How Credit Cards Can Become a Problem

Although there are many advantages to having and using credit cards, there can be a lot of disadvantages as well. Ultimately, they are a bill you have to pay. Like all bills, they can become hard to keep up with for several reasons.


With more people using credit cards than ever, lenders are becoming more competitive in extending their offers to potential customers. Currently, many offers are preapproved without any requirements to confirm your income or meet a debt-to-income ratio. On new cards, the average credit limit is now at $5,800. This is the highest limit for new cards in at least seven years.

If your limit is too high relative to your income or debt-to-income ratio, you might not be able to make your payments. A high limit can also encourage you to overspend, making credit card payments challenging.

Having too many cards

In 2021, there were 76.2 million open Mastercard and Visa cards in Canada. Over 95% of adult Canadians have at least one card. Keeping track of multiple cards and their bills can take time and effort. The more payments you have to make, the easier it is to miss one.

High-interest rates

Some credit card interest rates are lower than others, but these rates are still relatively high. Therefore, if you have a high balance owing on your credit card, you could have a large minimum payment, but most of it will go to interest. As a result, you could be making payments for years without making much of a dent in the balance you owe.

Credit card bills and late payments

Credit card companies always provide a bill you can get by mail or online. The bill will have the following details:

  • Credit limit
  • Interest rate
  • Amount owing
  • Payment amount
  • Payment due date
  • Interest charges
  • Date and amount of your last payment
  • Itemized transactions for the month

It’s possible that, due to circumstances, you cannot make your minimum payment by the due date. Unfortunately, late credit card payments can cause problems in several ways.

Late fees and charges

Your credit card company may charge late fees, adding to your costs. In addition, some credit card companies will increase your interest rate significantly if you have two or more late payments within 12 months. Additional fees and a higher rate will make it harder to keep up with the payments.

Reduce your credit score

If you miss a credit card payment or are late, it can reflect on your credit score. Credit card companies that report to the credit bureaus usually do so once your payment is 30 days late. Making your late payment in full before it’s 30 days overdue may avoid having it show on your credit report. A partial payment paid after the due date but before 30 days late will still show on your credit report as a late payment.

Late payments play a significant role in the calculation of your credit score. This is because your credit score is made up of 5 factors which are:

  • How long you’ve had a credit history
  • Public records
  • The amount of credit you’ve used compared to the amount of credit you have available
  • The number of inquiries made on your credit history
  • Payment history

Your payment history accounts for about 35% of the calculation of your credit score. The heavy weighting of payment history in the calculation of your credit score is why late payments can easily hurt your credit rating.

Missed payments can stay on your credit report for six years. A history of late payments or a low credit score can make it hard to qualify for things you need.  Companies will often check your credit report if you apply for credit, need to rent a place to live, need services such as utilities or a cell phone, or sometimes even before certain employers hire you. You might still get approval for credit with a low credit score, but your interest rates will be higher than if you have a good score.

Collection agency

Your creditors will try to collect their payments by contacting you. If your account is over 90 days overdue, you might notice that the company is no longer calling you. After more than 90 days of being overdue, they often sell or transfer your account to a collection agency. Once this happens, you may receive far more calls and attempts to collect on the overdue bill.

Having a collection on your credit report can significantly reduce your credit score. A debt that has gone to collection means it is still unpaid and has been for quite some time. Lenders, landlords, service providers, and potential employers may view you as high-risk if a collection is on your credit report. They may not be willing to approve you for credit, allow you to open an account for utilities or a cell phone, approve you as a tenant or hire you.

Getting Help With Credit Card and Household Debt

If you feel you have more consumer debt than you can manage, you are not alone. Credit card debt is at an all-time high in Canada, with the average credit card spend per month almost $2,447. In addition, increases in the cost of living and housing and the lingering effects of the pandemic have left 52% of Canadians anxious about paying their bills. 

Household debt, which includes any debts that require payments and interest, increased by 8.2% in the last year. Increases in the cost of living and household debt have risen faster than pay increases, so it’s not surprising Canadians are struggling financially. 

Finding yourself in a position where you have to choose between buying groceries, paying your utility bills, or paying your credit card bills can be very difficult. Fortunately, there is help available.

Allan Marshall and Associates have a team of Licensed Insolvency Trustees who are experts in providing financial solutions if you are overwhelmed by debt. Contact Allan Marshall and Associates at 1-888-371-8900 for a free consultation and take the first step towards a brighter financial future.

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Scott Marshall BBA, C.I.R.P, L.I.T

Scott is serving as Vice President and managing partner of Allan Marshall & Associates Inc. since obtaining his License as a Trustee (LIT) in 2003. Scott graduated with a Bachelor of Business Administration (BBA) from the University of New Brunswick and is an active member of the New Brunswick business community. In past years, Scott has been a valued member of the Wallace McCain institute.