Are 30-day late payments a thing of the past?

07.16.09
By John Ulzheimer

It's a stretch, but the new Credit Card Accountability Responsibility and Disclosure Act (a.k.a. the CARD Act) might just have an unintended side effect that could help consumers maintain better credit scores. There are three components of the Act that lead me to feel this way. We’ll review each of them separately and I’ll explain why I think they will help consumers avoid the dreaded 30-day late payment :

• Extended Grace Periods – The grace period is the amount of time between the end of your billing cycle and the day the payment is considered due. This amount of time has been shrinking for years and now it seems like some of our credit card bills are due within a couple of weeks from the date we receive the statement. This makes it tough on the consumer who lives paycheck to paycheck and doesn’t have any savings. They are forced to wait until they get paid before they can make a payment. If the grace period is too short, they might have to wait until after the due date in order to send a check or pay online. The CARD Act ensures that we will all have at least 21 days of a grace period. This is because the bill cannot be due until 21 days after it is mailed to you. Currently many credit card issuers set this at a too-short 14 days. 

• Terms cannot be changed adversely until the consumer has gone 60-days past due – Believe it or not, I’m actually not in favor of this provision of the CARD Act. I don’t think it’s fair for a creditor to have to wait 60 days before they can react to a consumer who is past due. But, my opinion of the provision is not the topic today. What is important is you actually might find credit card issuers who will not only wait to change the terms of the account but they might also not report you as being late until your account goes at least 60 days – 2 cycles – past due. This isn’t that much of a change from the status quo. Credit card issuers can choose to not report late payments until the consumer is several cycles past due. This helps them avoid mistakenly reporting low-level, 30-day late payments to the credit bureaus and also helps them avoid the costs involved with handling consumer disputes because of the same.

• Payments made at a branch must be credited on the same day – This method of making a payment is the most old-fashioned but continues to be the most reliable way of ensuring that your payment is made, received, and credited before the due date. It’s more reliable than U.S. Mail and faster than online bill pay. The downside to this is the creditor can charge a fee for an in-person payment.

The last person selected in the NFL draft each year is given the unflattering title of Mr. Irrelevant. Many people would consider 30-day late payments to be just as irrelevant, as they don’t always mean a consumer is a poor credit risk. Have we seen the end of these irritating and oft misunderstood credit report blemishes (a 30-day late actually means you are 1-30 days past due rather than a full 30 days past due)?  If so, we can chalk one up to common sense. Now if we could just figure out a way to get rid of medical collections.   

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Could the new credit card laws change how lenders report 30-day late payments?