Should You Be Worried if You Miss a Payment?


In our fast paced world it’s not uncommon that you may forget to pay your phone bill one month. Accidentally making a late payment once in a blue moon isn’t the end of the world. However, missing payments because you don’t have enough cash this month, is a cause for concern.

There are negative consequences for missing payments:

  • You may be charged a late fee. Late fees can be as much as $25 to $35.
  • Your interest rate may increase. Depending on the terms of your loan, missing a payment or two may trigger an automatic interest rate increase which will impact the cost of all future balances.
  • Over-the-limit fees can also be charged. If your missed payment happens while you continue to use your card, you may risk extra charges for going over your credit limit.
  • It may affect your credit report. An overdue payment can be reported to a credit bureau by your creditor. An R1 rating means you are current. An R2 ration means you are 30 days overdue, and theses notices escalate to an R5 which means you are at least 120 days overdue.
  • Collection agencies will start calling. The original creditor may place your account with a collection agency once you are three months in arrears, and that leads to a lot of phone calls from collection agents.
  • Your other borrowing costs can increase. Having late payments appear on your credit report will negatively impact your credit score, increasing the interest rate new lenders will want to charge for any new loans that you take out.

If you are constantly running out of money at the end of your pay period then the problem may be as simple as an over-extended budget. Take a cold hard look at your budget and find ways to bring your spending in line with your income.

If you struggle with the concept of formal budgeting, try something much simpler. Pay all your bills every time you get paid. That means if you get paid every two weeks, pay off a portion of your bills each and every payday. If your phone bill is usually $180, pay $90 every two weeks. Pay half of your mortgage payment each and every pay. Doing this means that you focus on making sure your pay goes towards paying your living costs first and you are much less likely to find yourself facing large bills at the end of the month, with no money left over to pay them. An added bonus with this system is that in those months when you receive an extra pay, you will find yourself with extra money which can be put towards debt repayment or savings.

If your phone bill is usually $180, pay $90 every two weeks. Pay half of your mortgage payment each and every pay.

If you are constantly missing payments despite your best budgeting efforts then the problem may be the amount of debt you are carrying. A study by our firm found that almost 1 in 4 Canadians carry a balance on their credit cards and half of those do so regularly. If you are carrying credit card debt, lines of credit or other debts that you can’t repay, it may be time to look at other debt management options that can help you get out of debt.

Managing money takes time and focus. However, making the effort is one way of ensure that your debts don’t become unmanageable, your credit score remains healthy and that you will be much more likely to build a stronger financial balance sheet for your future.

Doug Hoyes has extensive experience resolving financial issues for Canadians. Doug is a Chartered Professional Accountant (CPA), Licensed Trustee and Chartered Insolvency and Restructuring Professional.

Learn more about Doug Hoyes