Here’s What Happens When a Bank Rejects Your Credit Card Payment

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My bank rejected my scheduled credit card payment at the last minute. Here’s what happened next and how to protect your credit. 

The email arrived in my inbox without warning. It was from my bank. Your direct debit has been declined, it said, to the tune of $500. It was $500 that I’d attempted to put toward paying off my credit card balance. But I had insufficient funds in my bank account, so the payment bounced.

Cold sweats. I opened my Discover app. There it was, the $500 balance. Sitting there, very much unpaid and weeks past due.

The consequences for missing a credit card payment range from a small fee to a docked credit score and total account closure. The latter was unlikely — I wasn’t 30 days late — but this was the first time I’d missed a significant charge, so I was nervous.

Holding my breath, I checked to see if I’d at least made the minimum payment.

I had. Phew. I’d never been so grateful to set up automatic monthly payments, saving me from potentially paying a late fee.

It all started because I hadn’t had enough money in the bank to pay my credit card bill. It could have happened to anybody. Here’s what happens when a bank rejects your credit card payment.

The bill doesn’t go through

The transfer will fail to process if you don’t have enough money in your checking account to pay a credit charge. You’ll probably be notified one of three ways:

Via emailVia text messageVia app notification

I received email notifications, twice. Once, when my bank failed to process the charge. The second, when my bank was unable to process the charge two days later. Had I deposited the needed money right after the first email, I could have made the payment without issue.

How often your bank attempts to process your payment depends on the company policies of the bank and credit company, which you can discover via their websites or by contacting a representative.

You may pay interest on any unpaid balance

Let’s say you make the minimum payment but still have an unpaid balance left over. Your credit card may charge you fees on that balance. How much you’re charged depends on your APR, which is unique to each credit card.

Some credit cards offer low APRs, making these fees less horrendous. Some zero-interest credit cards even offer sign-up bonuses with 0% APR for up to two years after joining.

Also, some cards offer grace periods. My card offers a grace period of about one month, which gives me 25 days to make late payments before incurring interest on my unpaid balance.

Note: Typically, grace periods only apply when you’ve paid the previous cycle’s balance in full.

An unpaid balance may also impact your credit score. The balance carries over to your next credit cycle, and it counts toward your credit utilization ratio, which is how much credit you’re using at any one time. Use too much credit, and your credit score will go down. Avoid this by keeping your credit balance low or paying in full.

Credit bureaus may dock your score

If you fail to make the minimum payment, your credit card may be charged interest, and if you’re really late (30 days or more), you may face more severe consequences. Common ones include late fees, increased interest rates, and a hefty hit to your credit score.

It’s worth noting that paying your bill a week late probably won’t hurt your credit score. Credit card companies cannot report late payments until you’re 30 days late.

Your credit score won’t be docked if you make the minimum payment. That said, paying off the whole bill whenever possible is typically a good idea. Credit card debt builds up quickly, and interest rates on unpaid balances (a.k.a. penalty APR) are often in the 20% range.

How to protect your credit

Consider setting up automatic payments to protect yourself from the worse consequences of missing a credit payment. Many large companies let you set up automatic payments in-app. I have mine set to make minimum payments in case I forget. A good thing, too!

If you’re unsure exactly how a missed payment will go down and want answers, your best bet is to contact your credit company. Policies vary by company, so they’ll know best. The best credit cards offer access to professional representatives and other perks.

Consider setting up smart credit habits like payment reminders and automatic payments, and check out your credit company policy for late payment details. Here’s to staying financially healthy this summer, and no more missed payments. Cheers.

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