Various E-commerce and shopping platforms provide discounts and offers on purchases time and again. These offers are mostly given on credit and debit cards. So, if you are a credit card holder, you can avail of these offers. Credit Cards allow you to purchase now and pay later for your buys using installments. You can even convert your credit card bills into EMIs. 

The repayment time for credit card services is very flexible and ranges from 3 to 36 months. Even though using credit cards is beneficial and it is also convenient to make payments through EMIS, you should know about certain things about credit card payments and the credit card EMI option before you start using them. 

Things You Should Know Before You Avail The Credit Card EMI Option

Processing Charges

You have a processing charge associated with each credit card EMI plan. It is good to speak to the credit card issuer before you choose an EMI plan. 

Rate of Interest

Your credit card service provider will charge interest on the amount that is to be converted in addition to processing charges. Various e-commerce sites also provide No cost EMIS, which do not require any additional payments. 

Credit Card Balance

Always check the card’s credit limit before converting your credit card balance into EMIs or making a payment. Otherwise, this request will be denied. 

Credit Balance

The card provider will block the outstanding amount if you are converting a transaction into an EMI. The blocked amount will be released as and when you make the EMI payments. The credit balance will keep rising in this way. 

Foreclosure Fees

If you want to foreclose your EMI, a fee plus GST will be levied. 

Defaulted on EMIs?

If you miss on a payment, then you will be charged late fees. Also, the rate of interest will be increased. Missed payments will also lower your credit score. 

What Will Happen If You Are A Credit Card Defaulter?

Negatively Affects Your Credit Score:

Making late payments or missing out on credit card payments leads to a lower credit score. This will nullify the benefits of a credit card. If you use your credit card effectively, then your credit score remains healthy. 

Blocking of Your Credit Card Account:

Defaulting on your credit card bills will have you blacklisted by the bank. The bank then blocks your credit card account. 

Legal implications: 

If you pay your credit card bills over a very long period of time, then the lender may consider you as a fraud. This will in turn make it difficult for you to get a credit card in the future. 

High interest rates: 

If you default on your credit card bills by more than 60 days, credit card companies charge interest rates as high as 30% of the credit card overdue. The high interest rates are also applied on the new purchases that you will make using your credit card. If you keep on over-defaulting, then interest will get accumulated so much that, you will be facing a staggering debt. 

Interest on outstanding balances:

It is not enough just to pay the minimum amount due. Some credit card holders think that they will not be charged any interest if they just pay the minimum amount due of the credit card bill. But, this is not true and you will have to end up paying interest from the due date on the outstanding bill amount. 

Asset Acquisition:

 Banks will try to use the amount in your savings and fixed deposits to clear the bills. In the worst-case scenario, they may even seize your properties. 

How to Avoid Defaulting on Credit Card Bill Payments?

  • Sign up for the auto-pay feature on your credit card’s mobile application or online portal. 
  • Do not wait until the last minute to pay your credit card overdues
  • Set up timely reminders for your due dates
  • If you are short of paying the entire credit card bill, then pay the minimum amount due before the due date. The rest of the amount can be paid in the interest free period. 
  • You can take a personal loan to pay out your credit card bills if you are short of funds. Personal loans have lower interest rates.
  • You can convert your credit card bills into EMIs. And you can conveniently pay the bill over a period of time. 
  • You can also transfer your credit card balance to another bank’s account and pay it through regular EMIs. 
  • In the worst-case scenario, you can file for bankruptcy and then restructure your loan.

Conclusion

Using your credit card effectively will give you great rewards and benefits. You should be judicious and alert in using the credit card so that you get the maximum advantage out of it. 

FAQS Credit Card Payment: Tips To Prevent Money Losses, Penalty, & Fraud

1:How to avoid late payments on credit card bills? 

You can avoid late payments on credit card bills by setting up the auto Pay option, timely reminders for your due date, and keeping track of your credit card statement regularly. 

2:What are common credit card payoff strategies?

The 3 most common credit card payoff strategies are:

  • Making only the minimum payment. 
  • Paying more than the monthly minimum, which will help you quicken your debt payoff. This is a more aggressive approach. 
  • Using a balance transfer credit card. 

3) Can I be jailed for credit card debt?

The Bill of Rights (Art. III, Sec. 20 ) of the 1987 Charter declares that "No person shall be imprisoned for debt." This holds good for credit card debts as well as other personal debts.

4) What will happen if you don’t pay the credit card bill for 5 years?

If you continue to default on your credit card bills, the credit card lender may close your account, although you will still be responsible for the bill. If you don't pay your credit card bill for a long time, your issuer could finally sue you for repayment or trade your debt to a collections agency (which could then sue you).