Vision Credit Education, Inc.

Your Nonprofit Credit Counseling Organization

Slow Pay

Definition

Slow pay is a condition in which a revolving credit card account is repaid by making only the minimum payment for at least 6 consecutive months.

Analysis

Slow pay is one of the least understood aspects of revolving credit. A credit card account can be hit with a slow pay classification by a card issuer if you fail to pay more than the minimum payment for an extended length of time.

There is no slow pay reporting on a credit report. Instead, it is simply an internal classification that some credit card issuers use to label credit card customers that fail to pay more than the minimum payment.

Slow pay penalties fall under the “any time for any reason” clause in which a credit card company may decide to raise an interest rate. These policies have come under question as the Federal Reserve has proposed to clamp down on “abusive” credit card practices.

Perspective

This author first learned about slow pay penalties many years ago when paying off a couple of credit cards. While focusing on making accelerated payments to the card with the highest interest rate, only the minimum payment was made to the other card.

At that time, the card with the lower rate raised the interest rate following six consecutive months of making on-time minimum payments. A phone call to the card issuer provided an explanation of the slow pay policy. In addition, the lender agreed to restore the original interest rate per my request.

The lesson learned is that a cardholder should always attempt to pay more than the minimum payment at least once every few months, even if trying to pay off another card first. Doing so could prevent the slow pay label and the higher interest rates that follow.