Oh, no!  today is the day that most of the furloughed employees are dreading.

The day they realize that their paycheck just won’t be appearing in their checking account.

Sure, they’ve been working for a while without pay.  (Which one of you thought slavery was abolished in the USA????)

Nope, today these folks have to make decision who to pay- and how much.

For what it’s worth, I am pleased that one of my charities,  the Hebrew Free Loan Society, is proffering $2000 loans to these employed by the federal government that are not getting their paychecks today.

One of the decisions many of these folks are going to make is to skip the credit card payment.  Paying the mortgage or the rent.  And, then, being out of money.   Which means that when they need to pay for something else, they better have the cash- because the credit card company may freeze their account(s).

But, besides freezing their accounts, the first thing the credit card company will do is ding their credit history.  Notifying all three bureaus that no payment was received.  Since 35% of your FICO score is derived from credit card (and other balance) payment history, your score will be much worse than before.   And, it’s not a set penalty.  Should you have had a 680 credit score, you can expect your new score to range from 600 to 620.  But, if you were in a higher echelon, say 780, your new score would be somewhere between 670 and 690.

The second thing the credit card company will do is charge a late fee (from $ 35 to $50) and impose interest on the balance.

Interestingly, if you get a pile of money in the next 10 days (ok, that’s a miracle, but bear with me here) and you look up the exact balance on the card and pay it off, you will still be paying interest.  Because the credit card company hasn’t posted the interest for the current 10 days (the days after the period of the skipped bill).

Some of them won’t let you pay more than the posted balance.  Say you owed $ 2K, and now that you missed the payment, with the late fee and interest your bill looks like $2082.22.  And, you want to pay $ 2090 to cover that new interest charge for 10 days.  You can’t.  The credit card company won’t take a payment over $ 2082.22.  Claiming they can’t hold your money for you- but it’s really a means to keep charging you interest.

Oh, and there’s more.  If you did make that $ 2082.22 payment AND started to use your card, they will charge you interest on the stuff you just charged.  Because your balance has to be zero at the end of the cycle to turn off their interest machine.  (Trust me- read that fine print they’ve been feeding you for years.)

Which brings up a step that may work.  (Citicorp is generally one firm that cares not one whit and will say no.)  Call the credit card company, if you’ve been a faithful customer, and explain that you are going to miss the payment because you are on furlough.  They waive the late fee, they may even not report your non-payment to the credit bureaus.  (They WILL charge you interest.)  But, you better pay that balance by the next period.  Because their willingness to be “good guys” isn’t much better than our political parties’ ability to act in a bipartisan fashion.

It gets worse.

Your higher FICO score- and your missed payment- will afford your credit card company to up the interest rate they charge you on their balances.  Now, if you normally pay your credit card in full when you are not on furlough, this won’t be too much of a hardship.  But, if you don’t, expect to pay more money each month from now on.

The good news is not all credit card companies jump to the penalty phase with just one missed payment.  But, they all do with two such dings.  And that new interest rate will be around 30% (cutely, they use 29.99%).

And, your late payment is like an unwanted relative.  It will stay on your score for 7 years!  (Experian is one such harborer.)

Since we are talking about those affected by the petulant one, I won’t spend too much time discussing what happens if you keep missing payments.  Oh, wait, maybe I should, since TheDonald declared he would be proud to keep the government shut down for a year or so.

If you fail to pay your credit card for some 90 days, you will find you have become suddenly popular.  With calls in the morning and the night from a collection agency.  Some credit card companies keep these in-house, but others (CapitalOne comes to mind) sell your debt to an outside agency, which are really aggressive with their tactics.  (If you don’t pay them, then your bill could be sold to someone else.  Who may elect to sue you.  Meanwhile you have multiple instances of non-payment on your credit history.)

This means your credit card score drops even lower.

And, please don’t say, “I don’t care.  I’m not borrowing any money right now.”

That simply means you don’t know what your FICO score controls.  The rates you pay for home/rental insurance and your car insurance are affected by your FICO scores.  You will be paying more for those necessities.

So, now it’s time for you to create a budget.  One you will follow carefully.  Not just because your money situation sucks now- but for the future.

I know you thought being a government employee was a stable, useful occupation.  But, you didn’t count on TheDonald.  Or, his WrongWing constituency.

Your job- besides your job, when you finally get back to it- it to accumulate a slush fund.  One equivalent to at least one paycheck, but a three-month reserve is best.  So, you won’t ever find yourself in this delicate situation again.