There may be various reasons that could lead to missing your credit card bill payment. These could be overspending and not paying the bill due to insufficient funds, getting confused about the billing date and due date, etc.
Unlike what is shown in the movies, your credit card provider will not show up at your workplace or residence when you fail to pay your credit card bills. However, they will definitely take actions against you that could affect your credit worthiness for months or even years!
Knowing the consequences of failing to pay your credit card bill will push you to be cautious and pay the bills on time. Some of these consequences are discussed below.
#1 Late payment fee If you pay your credit card bill after the due date, the lender will levy a late payment fee in addition to the total amount due. The Reserve Bank of India (RBI) has instructed credit providers to levy a late payment fee only if the bill payment is due for over 3 days after the due date. However, it is advised not to wait till then to pay your bills. It is best to complete the bill payment before the due date to avoid any late fees.
#2 High interest rate The rate of interest on outstanding credit card bills will go up if you do not pay at least the minimum amount due within the bill’s due date. If you continue to use the credit card to make purchases even after defaulting on the repayment, the higher interest rate will also be applicable on those purchases.
#3 Revoking interest-free credit period Failing to pay your credit card bills can also lead to the lender withdrawing your interest-free credit period. This interest-free period is a great advantage as the lender finances your credit purchases during that period without charging any interest.
#4 Lowers your credit score Your credit score is used by banks and financial institutions to check your credit worthiness. This is used to evaluate your credit card or loan applications. Your credit repayment history has a huge impact on your credit score. So, any delay in paying your credit card bills can lower your credit score, reducing your chances of getting any new loans in the future. A low credit score can also lead to the lender charging higher interest rates for loans.
#5 Reduction in credit limit Multiple defaults in repaying your credit card dues can lead to the lender reducing your credit card limit. This may restrict your spending power.
Credit cards come with various benefits like the convenience of payments, secure and quick transactions, and hassle-free operations. However, you must be careful while using a credit card to enjoy these benefits to the fullest.
When using a credit card, it is always better to be safe than sorry. Now that you know about the consequences of failing to pay your credit card bills on time, ensure that you stick to the due date and pay your dues.
One way to ensure that you do not miss the due date could be to set a standing instruction with your bank to automatically pay the outstanding credit card bill from your bank account on the billing date.
Also Read: Four Questions To Ask Yourself Before Getting A Credit Card