® 
Do you use a credit card regularly for your day-to-day expenses and other purchases online and offline? Then, you’re probably accustomed to paying your credit card bills month in and month out. But, have you ever missed or delayed your credit card payments? Wonder what happens when you default on a credit card bill?
Missing or delayed credit card bill payments cause several consequences. Here, in this article, you can find out how late payments can continue to impact your financials for weeks, months or even years to come.
5 Consequences of delaying/missing Credit Card Payments
-
You are charged a hefty late fee
When customers fail to pay credit card bills before the due date, the credit card issuer charges a late fee. This late fee is added to the next credit card bill. Late penalties vary from one credit card company to another, and may be dependent on several factors like – the number of days you have delayed the payment, previous late payment history and more.
Recently, the Reserve Bank of India issued a notice to all banks stating that they should start charging the late fee only when the payment is due for more than three days after the due date.
-
It impacts your credit score negatively
Your credit score is used by banks and other lenders to determine your creditworthiness. To explain it in simple terms, if higher the credit score, the better are the chances of your loans and other banking requests getting approved.
One of the important factors that determine your credit score is your payment history. When you delay your credit card payments, your bank informs the same to credit information companies and is noted in your credit score. Delayed/late payments bring down your score, which in turn, negatively impacts your ability to apply for new credit with the same lender or other lenders. A poor credit score not only leads to rejection of your loan applications, but can also lead to you being charged high interest rates for loans, which you take in the future.
-
Higher interest rate on your outstanding credit card bill
When you don’t pay the credit card bill on or before the due date, the interest rates on your outstanding bills increase. The increase in interest rate is applicable on all purchases you make using the card as well as cash withdrawals after the due date.
-
Reduction in your credit card limit
Frequently missing or delaying your credit card bill payments can cause your bank to reduce the available credit limit on your card. This, in turn, restricts your spending capacity.
-
Missing out on the interest-free credit period
Defaulting or delaying your credit card payments can cause the bank to revoke the interest-free credit period from your card. Most banks allow an interest-free credit period of 25 – 30 days, during which you can make purchases using your card without incurring any interest on, spends. However, when you fail to make payments on time, your bank can withdraw this facility.
What to do when you have missed a credit card payment?
The two main reasons why customers miss credit card bills are:
-
Forgetting the due date
-
Insufficient funds
Depending on the cause of missed payments, you can take the right actions to minimize the damage. Let’s take a look at what to do for both scenarios.
#1: What to do if you have forgotten to pay your credit card bills on time?
If you are a disciplined credit card user, who usually pays on time, then get in touch with your bank to pay off the outstanding bill amount immediately. You can also request the bank representative to reverse the late-fees. Very often, most banks reverse the late-fee charges for one-time delays.
While it’s true that failing to pay your credit card bill once does not bring your credit score down quickly, you need to be extra-cautious in the future. Repeated instances of delayed payments impact your credit scores causing it to fall.
#2: What to do if I don’t have the necessary funds to pay my credit card bill?
If insufficient funds are the reason for not paying your bill on time, make sure to discuss this openly with your bank. Most banks offer customers with an alternative way to settle the credit card dues like – a personal loan or other repayment mechanisms where you repay the outstanding amount as monthly EMIs.
Doing so reduces the interest burden on the outstanding amount and helps you tackle the situation efficiently.
Alternatively, you can pay the minimum balance on the bill right now, and pay the remaining in the next bill cycle.
However, note this is only a temporary solution as paying only the minimum amount regularly could lead to serious ramifications. When you pay only the minimum amount your credit card issuer charges interest on the balance amount, starting from the due date. This could end up very costly, sending you into further financial troubles.
The best option is always to clear the entire dues on time.
Addtional Reading: How to pay your Credit card bill online
End Note
Pay your Credit Card Bills on Time and Avoid Negative Financial Consequences
If you are someone who has a habit of forgetting to pay bills on time, then you need to take the right precautionary measures. Start by setting a reminder on your mobile phone that alerts you a couple of days before the due date.
If you’re finding it difficult to control spends, then it’s time to close your credit card account and switch to a debit card or another credit card with lower limits. Remember, the longer you delay the payment, the more serious are the consequences.
So, make it a habit to pay your credit card bills on time and keep your finances on track.