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Credit cards can offer immense support for all your daily requirements and emergencies. Holding a credit card adds an extra layer of liquidity to your savings. However, you must be cautious about your credit card payments. This article aims to cover the aspects relating to the consequences of late credit card payments.
What triggers a delay in credit card bill payments?
Let us first understand the primary causes that may lead to delayed payments.
- Insufficient funds – You spend an excessive amount of your credit limit and face trouble with bill payments.
- Procrastination – Waiting until the last day to make the payments might result in missing the deadline.
- Due Date – You might forget or confuse the payment due date.
- Postal Delays – Dependency on physical bills might result in missing due dates.
Reasons to avoid late credit card bill payments.
Credit card bills must always be paid timely. Delayed payments or non-payments may lead to multiple issues. Here are the top 5 reasons to avoid late credit card bill payments.
- Late Fee – Making a late payment on your credit card bill requires you to incur late fee charges. As per the RBI norms, late fee charges are levied only if the bill remains outstanding for more than three days from the due date. The late fee charges then appear in the next cycle’s bill. Additionally, credit card companies might demand additional charges once the non-payment goes into months. In such cases, credit card companies might pursue the defaulter repeatedly and even mark the credit account as defaulting.
- Higher Interest Rate – If the outstanding amount on the credit bill is left unpaid for more than 60 days, the credit card companies might issue a penalty. Many credit card companies might issue penalties as high as 30% charged to the outstanding bill. The higher interest rate is also applicable to all credit card holder’s cash withdrawals and new purchases.
- Interest-Free period – A significant advantage of holding a credit card is the interest-free period that comes along with it. The interest-free period on a credit card is usually in the range of 20-50 days. Defaulting your credit card payment can result in the withdrawal of this feature.
- Credit score – Your payment history plays a significant role in defining your credit score. The overall credit score depends nearly 35% on whether you pay your outstanding dues on time. Late payments have an adverse impact on your creditworthiness by lowering your credit score. Your bank passes on your report to credit information companies, which assess these parameters thoroughly while evaluating your credit score. With a low credit score, lenders might not be willing to approve your loan application or might charge higher interest rates. However, paying the credit card bill on time boosts your credit score.
- Reduced credit limit – A habit of making delayed payments on a credit card bill might lower your credit limit, restricting your spending capacity in the future.
Even if your credit card is closed or deactivated, you are still liable to pay the outstanding bill. You can select various options to clear your bill, such as EMI on the outstanding bill amount or taking a personal loan to settle the amount. Unpaid dues make you pay more substantial interest payments than the principal amount. In addition, you must use your credit limit wisely to ensure you can make timely payments and avail additional benefits such as loans against credit cards.
How to avoid late credit card payments?
Let us understand how you can avoid cases of late credit card payments.
- Autopay Facility – You can use the autopay facility on your credit card’s online portal or mobile application. The feature enables automatic payments on your credit card’s outstanding bill amount, so you do not have to worry about your payment due date.
- Setting timely reminders – You may set reminders ahead of your credit card due date, so you do not miss your payment deadline.
- Minimum amount due – If you do not have sufficient finances to cover the total credit card bill, at least pay the minimum amount due on the outstanding amount. You can pay the remaining balance in the interest-free period.
- Make advance payments – You must not wait until the last minute to make the bill payment. Different modes of payment have different processing times for the payment to get reflected. For example, cheques might take 2 to 5 working days, while online payments might take a few hours to a day to get processed. Making the payment in advance is crucial to avoid missing the due date.
If you miss your credit card due date, you must immediately contact your credit card company and find a solution.
Delayed credit card payments might lead to numerous outcomes, such as a low credit score, additional costs, and exclusion from benefits. Moreover, making a credit card payment on time is essential to ensure a smooth credit experience.