What happens if you miss out on your credit card payment? |
Posted: May 4, 2022 |
No doubt that having a credit card in your wallet gives unparalleled freedom to spend. However for all the benefits offered, credit cards do come with some inherent risks attached. It is easy to get carried away with the spending freedom one gets with the card and can get one trapped in the debt spiral with high credit card interest rates. With the freedom to spend now and pay later, any delay or failure to pay the credit card bills within due time period, can become a costly affair and also might turn one into a credit card defaulter in case of repeated miss in the payments. So, if you’re new to the world of credit cards, let us understand some of the scenarios which often lead to delay in payments.
There might be situations where you overspend considering your available credit limit. However you fail to make the repayment due to insufficient funds. Hence it is always advisable not to spend more than 60% of you credit limit so that you are able to repay amount later.
In order to make most out of the interest free period, many people tend to wait until the last day to pay their bills which many a times may lead to missed payment. It is always a good practice to make your payment well in advance to keep yourself protected from the risk of missing on the bill payment and therefore from being liable to pay hefty interest charges for late payment.
If you have not opted for online receipt of your credit card bills to your email, then your bank would send the monthly statements by post to your opted address. In such situations it might happen that your bills may get misplaced or delivery may be delayed leading to late credit card payment. Hence it is always advisable to opt for e-statement of your bills to your mailbox.
Though less likely to happen, but there may be instance where one might get confused about the payment due date. Hence it is always recommended to properly check the billing date and payment due date immediately on receiving the monthly card statement and set the reminders accordingly. Missing a credit card payment may have serious financial repercussions that can affect you for months and even years to come. Let us look at some of the consequences of late payment or default in the credit card dues. 1. Adverse impact on your credit score Credit score is used by most of the banks to evaluate your credit worthiness. Your track of repayment history significantly contributes to building your credit score. So missing out on payments or late payments can have a significant effect on your score affecting your eligibility to get new credit in future and thus eventually hampering your financial health. 2. Late Fee You will have to pay a late fee in case of payment of your bills after due date. The late fee get charged by the card issuing bank in the subsequent credit card bill statement. 3. High rate of interest In case of non-payment of the minimum amount payable by the payment due date, the interest rate on your outstanding bill will increase. The higher credit card interest rate will also be applicable on the new purchases, if you continue to make purchases from the card after defaulting on the payment. Continued spend in this way might lead you to a situation where the interest on your credit card bill may become more than your actual credit card bill. 4. Payment of just the minimum amount due It’s a common misconception that if one pays the minimum amount payable, no interest shall be charges on the outstanding bill amount. In reality, one has to pay the interest on the outstanding amount starting from the payment due date with interest rates as high as 45% annualized. So it is always recommended to settle the entire outstanding in full and not just the minimum amount payable. 5. Reduction in credit limit Frequent instance of delayed payment or defaults can lead to bank re-evaluating and thus reducing your credit limit. Repeated non-payment can turn you into a credit card defaulter which may lead to the bank blocking your account and thus blacklisting you. The bottom line. It is always better to pay the card dues on time than face the consequences of a late credit card payment. You can set up a standing instruction with your bank to auto debit your account against the outstanding on the due date. Want to explore the best credit card apply online options? Here you go!
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